From a Bloomberg column by Brad Stone:

“There are two kinds of retailers,” Jeff Bezos famously said on a 2001 quarterly conference call, a few days after an influential coffee meeting with Costco founder Jim Sinegal at the local Barnes & Noble. “There are those folks who work to figure how to charge more, and companies that work to figure how to charge less, and we are going to be the second.”

… Now, for the second time in five years, Amazon has raised the price of its signature subscription service, Amazon Prime. It’s going up to $119 from $99 a year. …

Is Amazon raising the price of Prime because it has to — or because it can?

… Things today are quite different. Amazon’s earnings exceeded expectations, and the stock is up 71 percent in the last year. The company announced a relatively bounteous $1.6 billion profit on the quarter, partly because subscription services-Prime and some of the add-ons, like Amazon Music Unlimited-brought in $3.1 billion, up 60 percent from a year earlier.

So this time it feels as if Amazon is raising the price of Prime not because it has to but because it can. In 2014, both Amazon and Netflix proved they had considerable pricing power and that customers would shrug at modest increases. Netflix seems to test that proposition every two years. It raised rates last October; yet people keep happily signing up.

Amazon likely sees many ways to spend $2 billion in incremental revenue. (That’s the additional $20 multiplied by 100 million Prime customers, assuming that Amazon rolls out the price increase globally.) They might be getting ready to move from a two-day shipping guarantee to one day — after all, as Bezos recently wrote, customers are “divinely discontent.”

… So the answer to the question about Amazon’s price increase is probably both. Amazon is raising prices because it can and because in today’s hyper-charged competitive environment, it has to keep raising its game.