A Media One Stop Shop: Why Amazon Will Eventually Have a Spotify-Like Music Service

Amazon Prime Music

The On-Demand Music Streaming Market

Amazon Prime Music, the music streaming service accompanying Amazon Prime, has around one million tracks to offer. A full-blown music streaming service like Spotify has around 30 million tracks. That is no accident. Prime Music as a part of Amazon Prime can not abide by the rules the big major music labels have for on-demand streaming. There is a (monthly) price the remaining major music labels have in mind. And, no matter wether this price might be too high or not, it is the price the rights holders have set up. (And this price is to high to put it completely into the Prime subscription fee.) There is not one company that can change that. Not a dedicated startup like Spotify nor a giant like Apple. The monthly price for Apple Music on a per user level is the same as it is with every other on-demand streaming service. The only slightly innovative aspect Apple was successfully able to negotiate was a greater discount for family plans; something Spotify and the other services got as well right away.

The demanded ridiculously high monthly price aside, this behavior by the major rights holders makes completely sense. They use their market power to mold the market the way it suits these companies best. Among other things this means they are adamant to prevent another monolith like iTunes. Hence every music service gets more or less the same conditions by the labels.

In music the back catalogs matter. You might not mind not having your favorite TV show or movie on Amazon Prime Instant Video, but a music streaming service without the music of your favorite musician is at best a second tier choice or it is altogether a deal breaker. This, combined with the concentration of rights to most of the popular music of the last decades at less than a hand full of companies, creates a market that is in the hands of those rights holders.

Amazon Prime Music Now & Tomorrow

So, that is why Amazon Prime Music, as part of Amazon Prime, has a fraction of the back catalog all other big music services have. Now, there are rumors via The New York Post that Amazon is planning a full-blown subscription service:

Amazon is prepping a Spotify-killer, music sources tell The Post.

The e-commerce giant has held meetings in the past few weeks to discuss licensing tunes for a full-blown subscription music service that would ape streaming music market leaders Spotify and Apple Music, several sources confirmed.

The plan, still at an early stage, is the latest attempt by Amazon Chief Executive Jeff Bezos to become the premier distributor of entertainment content from books to TV and movies to music.

Amazon Prime Music is almost certainly going to be split in two: There will remain a bare bones music streaming service that comes free with a Prime subscription; the same as it is today.

Additionally, Amazon will introduce a new service that is comparable to Deezer, Spotify, Apple Music and others in features, music selection and pricing.

But given the structure of the music market, it is next to impossible for Amazon to do something radically new or different in this space.

So why even bother?

(Streaming) Media Consumption and Amazon

A new ‘premium’ Amazon Music Prime service would not have to stand on its own as a product like Deezer, Spotify, Rhapsody and others. It is therefore in more than one aspect nonsensical to speak of a “Spotify killer”.

It makes more sense to compare this initiative with Apple Music. It is part of a greater whole at the company. For Amazon this means going with the times of media consumption. People not only are gradually stopping to buy CDs, they are also abandoning buying downloads and go straight for streaming (or Pandora style music services or less music consumption in favor of more Netflix..).

That is the context for Apple Music (eventually the successor to iTunes) and Amazon’s coming music expansion.

For Amazon the end goal is to offer all kinds of media from one system/account. Amazon Prime that is. Prime will eventually become a one stop shop for (close to literally) everything. A full-blown music service has to be a part of this.

So while the music service itself, once it will be unveiled, will on its own probably look very unimpressive -a “me too” product- it will make a lot of sense strategically. In fact, it is surprising it took Amazon this long. (Maybe Amazon was as arrogant as Apple in thinking they could eventually move an unmoveable object.)

This is also the context in which to read the expansion of Audible into podcasts and other content. Bloomberg:

Amazon.com Inc. is ramping up its investment in podcasts and other radio-style shows to expand the types of programming it offers via Audible, the audio book company it acquired in 2008.

Audible has recruited well-known comedians, along with radio and podcast producers for the initiative, and job postings suggest a significant global push. (..)

“Amazon is doing to Audible what it’s done to Prime Video — investing in original programming,” said Nick Quah, an executive at the Graham Holdings Co.’s Panoply podcast network who also writes a newsletter about the industry. “Amazon is hiring a ton of really good producers and managers out of public radio to acquire podcasts and develop shows of their own.”

Original programming -exclusive content- is a strategy that is not possible for music. After all, you won’t be able to compete with the Beatles and no artist will want to be limited to one streaming service forever. (Release windows on the other hand..)

But combine this Audible expansion with a full-blown music streaming service and Echo and you get a complete audio offering from Amazon that is unprecedented. Radio 2.0, if you need a buzzword.

It will be interesting to watch how Amazon will connect the coming music service to Amazon Prime, maybe making it cheaper for subscribers; and eating the costs. (It would almost certainly
turn into a loss-leader. But it would make sense for Amazon to make Prime even more attractive this way. And the major music labels might just go with this as Prime subscribers represent a limited market from their point of view.)

There is also the possibility/opportunity to finally release the full potential of a serious Prime Family Plan.

After all, why only heavily discount music streaming for families?

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