Outlook: Amazon Prime Membership Popularity Soaring

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On Thursday, Amazon issued a press release with highlights of the 2013 holiday season. Amazon (NASDAQ:AMZN) set records in several areas, including more Amazon Prime items shipped worldwide than ever before on Amazon’s peak shipping day. Cyber Monday weekend was the best ever for Kindle Fire tablets and Kindle e-readers, and 36.8 million items ordered worldwide on Cyber Monday, a new record for the company.

More than one million customers became new Prime members in the third week of December. The pace of Prime subscriber additions appears to have increased, with “millions” of Prime members added in the September quarter and over a million added in the week prior to Christmas. The company acknowledges that there are “tens of millions” of Amazon Prime members worldwide, suggesting that the total is greater than 20 million. This is slightly ahead of the 18 million global Prime members we modeled at the end of September, and suggests to us that Prime membership growth will accelerate in the coming quarters on a year-over-year basis. Prime membership was so popular this holiday that the company limited new signups during peak periods to ensure that the surge in new membership did not impact current members’ service.

Millions of Kindle e-readers and tablets were sold this holiday season. The Kindle Fire HD, HDX 7-inch, and HDX 8.9-inch were the bestselling tablets on Amazon.com this season. We believe Amazon Prime attach rate to Kindle sales are significant as the benefits of Prime to Kindle owners continues to grow with the Kindle Owners’ Lending Library offering more than 475,000 books that Kindle owners with Prime can borrow for free.

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