Back in the not-so-distant past, when Amazon (NASDAQ:AMZN) Prime was simply an offer of free, two-day shipping for $99 a year, determining its value to you was just simple math.
If the average, eligible delivery cost $3.99 for non-members, then simple math told you the break-even point is 25 deliveries. At that number of orders, a widget offered by Slate shows that if you paid $99 a year then each of your orders would cost $3.96. That would not have seen you wringing a lot of value out the service, but it still technically would have made sense to buy.
Now, however, Prime offers much more than just free shipping. It also includes a fairly impressive video service a la Netflix (NASDAQ:NFLX), with some top-tier licensed content as well as a number of Amazon originals. Prime also has a music service that's somewhat limited in selection, but still awfully good given that it doesn't add any cost.
Deciding whether it's worth ponying up for Prime involves determining how much value it offers you. To do that, you have to determine how much you will use each part of the service.
It's not simple math, and the answer won't be clear for everyone, but most people can at least determine if it's an on-the-fence decision or a waste of money.
Shipping is still key
The value of free shipping from Amazon has fallen as a membership perk due to the decrease in physical book, music, and video sales. Since the online retailer offers free shipping for Prime-eligible items if your order tops $35, the only orders members get a break on are ones under that threshold.
That was an easy number to meet back when people bought a single book, CD, or DVD, but it's a number that comes up less often when buying electronics, clothing, toys, or many other Prime-eligible items. Getting a few books and a CD or two every month would previously have made Prime worth it, and those are items people often want as soon as they are released.
It's less important to get diapers, dish-washing liquid, or many other Amazon items on a specific day, making it easier for non-members to wait until their cart tops the threshold before ordering.
Prime Video is pretty good
Prime Video is Netflix-like, but it's not Netflix. If you are deciding between the two purely based on video, Amazon has the lower price ($8.25 a month, though you have to pay $99 for the year all at once), while the streaming leader charges existing customers $8.99 a month, and new ones $9.99.
For that cheaper price, though, Amazon has a decidedly inferior service. It's not that Prime Video is bad, it just offers less of everything compared to Netflix, which has more higher-budget original shows, an expanding range of original movies, and more licensed content. Netflix also has Chelsea Handler's upcoming talk show and, really, just a whole lot of everything.
Prime Video has been improving. Originals like Transparent have received critical acclaim, and the company is the only non-HBO place to stream various shows from the cable network's archive. Still, however, it's not as good as Netflix in quality or quantity.
Prime Music isn't bad either
Like Prime Video, Prime Music is a good enough service that's a real value if you're already getting your money's worth from shipping. Instead of the almost-every-song-ever-recorded offered by paid services like Spotify, Amazon Music has a rotating million or so songs in its catalog. It also offers playlists just like the paid services.
Prime Music is by no means complete, but it has plenty of popular titles and enough lesser-known tracks to give most people something to listen to. It's farther from being a Spotify equal than Prime Video is to being a Netflix equal, but as a free add-on, it's still pretty good.
Is Prime worth it?
This is really only a question for people who fall under the shipping threshold. If you place 25 eligible free shipping orders a year (or even close to that), you should pay for Prime. If not, it would also be obvious that you should pay $99 a year if signing up lets you give up Netflix, a comparable streaming video service, or any of the unlimited music choices.
But for many people it won't be that obvious. If you order 12-13 packages a year and watch a little video and use some music on Prime, then it's probably worth it to you. It really comes down to Amazon offering shipping, plus two services that should/could cost $100-120 a year on their own.
In short, if you make up some of the subscription cost in shopping, you simply need to determine if you use either of the others at least half as much as you do another paid video or music service. In a broad sense, however, Prime is such a good value that it typically makes sense to pay the $99.
Daniel Kline has no position in any stocks mentioned. He is a Prime member who gets his value just from shipping. The Motley Fool owns shares of and recommends Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.