A key component of Amazon's (NASDAQ:AMZN) business is its Prime membership program. Revenue from Prime shows up in Amazon's subscription revenue, and it accounts for the vast majority of that line item in the company's quarterly reports.

Last quarter, subscription services revenue grew just 26% on a constant currency basis. That's a stark slowdown from the 50%-plus growth investors saw in the first three quarters of the year. While subscription services revenue growth is seasonally slower in the fourth quarter, the 26% mark represents the slowest growth we've seen since the company started breaking out the number.

Check out the latest Amazon earnings call transcript.

Before investors panic, though, it's worth taking a closer look at that number.

Amazon boxes ready to be loaded onto a cargo plane

Image source: Amazon.

A big accounting change

A major accounting change went into effect in 2018 that affected how Amazon accounts for Prime subscriptions. Instead of weighting Prime membership revenue to the fourth quarter -- when the benefits are used the most -- Amazon is now required to account for memberships on a straight-line basis.

CFO Brian Olsavsky said that resulted in $300 million in subscription revenue shifting from the fourth quarter to the first three quarters of the year. Under the old accounting rules, Amazon would've exhibited growth of around 34%. That also means the growth in the first three quarters of the year was artificially higher.

Adjusting for the accounting change, there's still a drop in subscription services revenue, but it's not nearly as severe as it looks.

The price increase is still working its way through

Amazon raised the price of Prime for U.S. customers this summer. New subscribers saw the price increase go into effect in May, while existing subscribers who renewed their memberships before June 16 got to keep the lower $99 per year price.

It will take time for those price increases to fully work through to Amazon's revenue recognition. It's still accounting for around half of memberships at the lower annual fee because it recognizes the revenue over the full membership year. As such, Amazon ought to recognize steady revenue growth from the price increase over the course of two years.

Prime membership is saturated in the U.S.

Even if the slowdown isn't as bad as it first looks, and if Amazon does experience continued service revenue growth from the Prime price increase over the next six quarters, there's no denying service revenue is slowing down.

That might be because Amazon has run out of room to grow Prime membership in the United States. That's not altogether a bad thing. The membership base is massive, reaching 100 million American shoppers, and those members are very loyal shoppers. Amazon realizes tremendous network advantages from its U.S. Prime membership base.

But Prime is certainly growing in other markets. Management pointed out that more customers signed up for Prime worldwide in 2018 than ever before in its earnings release. Olsavsky added during the company's earnings call that more people joined Prime in the fourth quarter than in any other quarter.

Prime doesn't cost as much in markets like India, where it's growing the fastest. But keeping prices low in certain markets enables it to capitalize on the long-term growth opportunities they present. Amazon can always raise the price of Prime in those markets later if it makes sense, just as it's done in the U.S.

No need to ring the alarm

While the sudden drop-off in subscription services revenue is a bit jarring, diving deeper into the numbers shows that Amazon's Prime subscription business is still healthy and a major contributor to the company's continued growth.

Amazon will continue to see more modest growth from the United States driven by pricing increases. At the same time, international Prime memberships ought to become a bigger piece of the pie over the next couple of years, eventually becoming the main growth driver for subscription services. That could result in a reacceleration of growth over time.