From Echo to Prime, How Amazon Incorporated Music Streaming Into Its Bundled Universe

Amazon Music Unlimited

Amazon is launching Amazon Music Unlimited, its new music streaming service, today. (press release) The new service is an expansion of Amazon Prime Music that has been a part of Amazon Prime with 2 million songs. (compared to tens of millions of songs at Apple Music, Spotify, Deezer and others)

Geekwire on the new music service:

The company on Wednesday is launching a new subscription music service, Amazon Music Unlimited, that starts at $3.99 a month for a library of tens of millions of songs. That’s less than half the cost of Apple Music, Spotify Premium and other competing music services. (…)

It was rumored in August that Amazon would soon introduce something like this.

Amazon is marketing those very different music services as tiers, but it will be confusing to consumers nonetheless:

  • Prime Music: This is the old, still existing tier, comes free with a Prime subscription, is available everywhere, has a catalogue of around 2 million songs.
  • Amazon Music Unlimited, Echo tier: $3.99 per month for a ‘full-sized’ catalogue comparable to Apple Music, Spotify and Deezer, tied to one Echo device.
  • Amazon Music Unlimited: The same as above, but not tied to one device, price is $7.99 for Amazon Prime members, $9.99 for non-members.

Amazon Music Unlimited tiers

The main news: The new inexpensive music streaming tier is not connected to an Alexa account but to a single Amazon Echo device. (an Echo, Echo Dot or Amazon Tap)

This severely limits the usefulness of the Echo-bound tier for its customers, as the service goes frome the rumored ‘listen to music at home’ to a ‘listen to music in one room’ mode. (More on why that matters long-term in a second.)

The new more expensive tier is arguably more interesting than the new low tier right now. Prime members pay only $7.99 for the service per month. Non-members pay the same $9.99 the major labels demand from every other streaming service to charge their customers. Even Apple, which reportedly negotiated really hard for a lower price for Apple Music, could not get the major labels to move.

The reason for this is simply the major labels having all the negotiation power and not wanting any streaming service to compete with a lower price against all the others, as I laid out in August. So that price is obviously set by the labels.

What about that Amazon Music Unlimited price for Prime members then? For the first time, a full-fledged music streaming service containing all the hits from the last decades is available for a wee bit less.

First, this is only possible by limiting a priori the potential customer base. (So that the $7.99 price doesn’t directly compete with the industry standard $9.99) This is as much the reason for the price for the Echo tier as it is for the price of this Prime tier.

Potential customer base for that low Echo tier: A subset of everyone owning an Echo device. (Comparatively very few people.)

Potential customer base for the Prime member price tier: Well, a subset of all Amazon Prime members. While this amounts to a lot more potential customers, some reports estimate as much as 54 million Amazon Prime memberships in the U.S., it is still limited. Hence, Amazon could convince the major labels to a slightly lower price. If one has to pay $99 upfront for a yearly membership for services rather unrelated to this streaming service to get into a position to pay less for this music streaming service than for any other music streaming service, then, the labels probably thought, the basis for competition is different enough to go with a different end consumer price.

That is why secondly, given all this, it is thus almost certain that Amazon is paying the difference. The labels may, rightly so, see the Echo tier as a fringe streaming service that, if anything, will only increase the market volume. But they certainly don’t see it the same way with a lower price for Prime customers. There are just too many Prime customers in the U.S. already. So, Amazon is almost certainly paying $2 per month per music streaming Prime member out of its Prime revenues to be able to offer those Prime members a $7.99 price per month. [1]

That is a lot of hoops to jump through to get to $2 less per month for customers. (And, on a side note, at least even less with an upfront $79 for a year.) Also, this is only for one-person accounts. The family plan is the same $14.99 per month as with every other service; another instance where a true family membership plan for Prime is sorely missed. (There needs to be a family membership Prime plan first that can be the basis for a subsidized family plan for music streaming to sit on top off.)

This is for once a negotiation situation where Amazon is not the one with the market power behind them. And the result shows. But all this goes to show how important it is to Amazon to offer a truly modern bundle with every kind of media served as it should be. (Even though Amazon did not reach the ideal they were shooting for.) And, for everyone who already is an Amazon Prime subscriber, especially the yearly $79 price, amounting to $6.58 per month, is very attractive. (Contrasted with everyone else charging or having to charge $9.99 per month for a comparable streaming experience.)

Amazon is also, understandably, using Alexa to differentiate the new music streaming service.

From the press release:

  • Ready to listen to Sia? Just ask, “Alexa, play Sia” and Alexa will create a playlist of Sia’s most popular songs
  • Want to hear the latest hit by Green Day? Just ask, “Alexa, play Green Day’s new song” and Alexa will play their latest single, “Bang Bang”
  • Have words to a song stuck in your head but can’t remember the name of the song? All you have to do is say a few words and Alexa will play the song. For example, just ask, “Alexa, play the song that goes, ‘I was doing just fine before I met you’” and Alexa will play, “Closer” by The Chainsmokers
  • Want to re-live the music from your college days? You can ask Alexa to play hit music from a decade or a specific year or month. Just ask, “Alexa, play the most popular rock from the 90s” and Alexa will take you back in time
  • Feeling down and need a pick-me-up? Just ask, “Alexa play ‘Happy Music’” and Alexa will choose a playlist based on your listening history like “Feel-Good Indie,” “R&B Fun” or “Pop To Make you Feel Better”
  • Want to listen to early catalog from a favorite artist? Just ask, “Alexa, play Van Halen from the 70s” and Alexa will play tracks from the LA rockers’ first couple of albums
  • Having friends over? Just ask, “Alexa, play music for a dinner party” and Alexa will choose a playlist based on your listening history like “Dinner With Friends,” “Cooking With 90s Hip-Hop” or “Indie Dinner Party”
  • Want to be surprised? Just ask, “Alexa, play the Song of the Day” to hear a song picked daily by Amazon Music editors. Song of the Day also features a DJ intro with fun facts about the song and an outro with suggestions for further listening
  • Not sure what to play? Just ask, “Alexa, play music” and Alexa will find something personalized just for you

And the (appropriately) audio-only version of exclusive additional content:

Amazon Music on Alexa also brings fans and artists closer together with behind-the-scenes artist commentary about their music, called Side-by-Sides. Customers can simply ask, “Alexa, play Side-by-Side with OneRepublic” and Ryan Tedder will play and comment on songs from OneRepublic’s latest album Oh My My. Side-by-Sides are available exclusively on Amazon Music from top artists such as The Chainsmokers, Jason Aldean, Lindsey Stirling, Norah Jones, OneRepublic and Kongos – with more being added all the time.

 

In August, I wrote in “How a Less Expensive Echo-Only Music Streaming Service Might Make Sense”:

Amazon could, and would, if given the opportunity, pull the same ‘trick’ [as Apple did with iTunes, the Mac and Windows]. A $5/month music streaming service tied to Echo is like iTunes on a Mac. The same streaming service, however, tied to an Alexa account is something different. Today, Alexa and Echo are synonymous. But this is changing rapidly as manufacturers of connected devices large and small race to integrate Alexa whenever it makes sense.

So, what today looks like an iTunes on Macs situation will slowly but surely turn into an iTunes on Windows situation.

This certainly did not come true. Amazon will not be able to silently increase the usefulness of the low Echo/Alexa music streaming tier by just letting Alexa expand into other devices. The labels demanded this low tier to be tied to one Echo device. (Obviously, they weren’t even satisfied with tying the low tier to Echo only devices.)

If Amazon could have persuaded the labels to tie the low tier to Alexa, Alexa would have become music lover’s dream. As it stands right now, Amazon wrestled an interesting entry into the music streaming market out of the major labels. But it is nothing more than that yet, just interesting.

Amazon’s first iteration of a full-blown music streaming offer may be confusing. (three (!) different tiers expanding into different dimensions) But, after all, this is more differentiated, and thus more interesting, than the last big market entry a year ago; Apple Music.

This certainly has legs.

Last not least, the media part of the Prime bundle is complete.

At least in the US. (Amazon Music Unlimited is coming to the UK and Germany later this year.)

More on this topic:


  1. Amazon is the only music streaming provider to offer yearly upfront fees, with the appropriate discounts. Being the only one doing this does hint at Amazon eating the difference in price here as well. If true, this is aggressive. For Prime members going yearly, this would mean additional costs for Amazon of $40.88 per user per year. ((9.99*12)–79=40.88) As part of the bundle, music streaming does not need to break even per se. But this would mean music streaming would always be losing money, no matter what. Which in turn would mean Amazon sees music as just advertising for Prime.  ↩

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