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Amazon Prime Now Costs $99 Following Price Hike

Updated from 8:42 a.m. to include thoughts from analyst in the third paragraph.

NEW YORK (TheStreet) -- Despite massive objections around the world, Amazon (AMZN - Get Report) has raised the price of its Prime service to $99 from $79, but offered users a chance to lock in the lower rate for the next seven days.

On its Web site, Amazon announced it was raising the price of Prime, "[f]or the first time since it was introduced nine years ago, the price of Prime is going up." When existing Prime members have their subscriptions run out, they will pay $99, while Amazon Student members will pay $49. However, if customers sign up for Prime within the next seven days they can lock in the lower rate of $79 for the first year.

Following the announcement, Cowen analyst John Blackledge said it could generate an additional $460 million in revenue for the company, as the company continues to add subscribers. "Purchases are habitual and are not impacted by seasonality for Prime members at this point."

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Some have considered the move controversial, suggesting that raising the price of Prime 25% will cause mass defections to other services, including Netflix (NFLX), which competes with Prime from a content perspective. Amazon Prime also offers users free, two-day shipping on goods ordered from Amazon's Web site.

TheStreet conducted a survey earlier this year, when the company announced it was first considering raising the price of the service. Of the more than 1,000 people surveyed between Jan. 31, 2014 and Feb. 2, 2014, 70.1% of respondents said "no" when asked if they thought the service was worth having at a higher price, regardless of whether they currently use it or not. Just 13% of the sampling subscribed to Prime.

Others have done surveys as well, and found similar results. UBS partnered with Consumer Intelligence Research Partners and found that while 94% of consumers would review at the $79 annual fee, that number dropped sharply with a price increase. Only 58% of those surveyed would renew if the price rose by $20, and just 24% said they would renew their memberships if the price rose by $40, to $119 annually. At the time of the survey, Amazon was considering raising the price between $20 and $40.

"Our survey results call into question our prior views about the value that a broad set of consumers are applying to the current iteration of Amazon Prime," UBS analyst Eric Sheridan wrote in a note, downgrading the stock.

Amazon has never fully disclosed the exact number of Amazon Prime users it has, but Macquarie analyst Ben Schacter recently confirmed with Amazon that it had more than 20 million members without being more specific.

The move comes as Amazon is getting ready to introduce a set-top bo to compete with others in the marketplace, including ones from Apple (AAPL), Google (GOOG) and Roku. It's thought that the set-top box will be a gateway for Amazon to not only sell more Prime subscriptions, but allow users to watch movies and television shows from Amazon, Netflix and Hulu Plus on the box as well.

Shares of Amazon were higher in premarket trading following the announcement, gaining 2.3% to $379.12 in early Thursday trade.

-- Written by Chris Ciaccia

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