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As always happens when you start a Socialist program, the first thing that will happen as Amazon starts this program and it attracts a lot of people is that prices for regular users will go up. Imagine if a lot of people start paying less than the cost of shipping and providing the TV shows – Amazon would need to raise the price of the standard service to make up the difference. As prices rise, there will be fewer people paying full price as they dropped out of the program, which will make the price go up even more. This will cause even more people to drop the service.
For an example of this, look at the cost of college. As more and more students get a break from tuition, the cost for everyone else goes up faster than inflation. This results in fewer people paying the full rate, until now it might cost $40,000 in tuition alone to send your child to a four-year instate college if you don’t get some sort of discount. This then provides an incentive for people to not do well economically since doing to leads to you paying more for the same goods and services.
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And this is where programs such as the one by Amazon will hurt the standard of living in America. If you incentivize people to not work and not produce, there is less to go around. This leads to scarcities and high prices. You want everyone at least doing something to contribute to society. Right now we have it pretty good with lots of choices and easy access to low-cost goods through places like Amazon. That may not be the case if Amazon changes the way prices are set in America through their actions.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
Comments appreciated! What are your thoughts? Questions?