Amazon challenges Apple
and Spotify with new music streaming service
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[October 12, 2016]
By Julia Love
Inc on Wednesday launched a full-fledged music streaming service with
subscriptions as low as $3.99 per month for owners of its Amazon Echo
speaker, accelerating the industry trend toward more flexible pricing
after years of sticking to $9.99 subscriptions.
The new streaming service, called "Amazon Music Unlimited," lets users
access a vast catalog of songs on demand, similar to Spotify and Apple
Music. Subscriptions to play music on the Echo cost $3.99 per month; for
access beyond that device, subscriptions cost $7.99 a month for members
of Amazon's Prime shipping and video service and $9.99 for non-members.
Amazon will continue to offer Prime members a limited streaming service
As it plunges deeper into the crowded streaming field, Amazon is
counting on the Echo, a smart speaker that responds to voice commands,
to set it apart. Released broadly last year, the Echo has become a
surprise hit, prompting many to predict that voice will become a key way
users interact with technology - and music is central to the device's
Amazon has built an elaborate system of voice controls for listening on
the Echo. The company believes such smart home devices will be a key
source of growth for the music industry, said Steve Boom, vice president
of Amazon Music.
"The first phase of growth (in music streaming) was driven almost
entirely by smartphones," he said in an interview. "We believe pretty
strongly that the next phase of growth in streaming is going to come
from the home."
Reuters reported details of Amazon's streaming plans in June.
The low price for Amazon's streaming service is consistent with the
company's reputation for undercutting the competition and signals the
music industry is beginning to accommodate consumers who are unwilling
to pay $9.99 per month. Having watched revenues plummet from the CD era,
label executives have been reluctant to budge on price, but they have
come under pressure as streaming accounts for more of the pie.
Boom said he is optimistic that the new prices will expand the market.
"We're moving music away from a one-size-fits-all approach," Boom said.
"We are the ones who have been pushing this the hardest."
Streaming services must pay a majority of their revenues to rights
holders, a business model that has left Pandora and Spotify struggling
to turn a profit. But Amazon can afford to take a loss on music
streaming, and the boost to Prime is well worth it, analysts say.
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Amazon.com's logo is seen at Amazon Japan's office building in
Tokyo, Japan, August 8, 2016. REUTERS/Kim Kyung-Hoon
premium music service, following the release of a standalone video service,
suggests Amazon will increasingly offer basic media options through Prime while
selling additional subscriptions for consumers who want to go deeper, said
analyst Jan Dawson of Jackdaw Research.
"It's just making Prime that much stickier," he said.
is also hopeful that artificial intelligence will keep users tuned in.
Recommendations based on listening habits have become a staple of streaming
services, and Amazon has also woven artificial intelligence into the system so
users can request songs that fit a particular mood or search with lyrics.
Data from the Echo has taught Amazon much about the language of music, said
Kintan Brahmbhatt, director, Amazon Music.
"You can ask for Michael Jackson by saying, 'Play music by the King of Pop,'" he
said. "It's smart enough to know that's what you meant."
Despite the low price for Echo-only subscriptions, Amazon and the labels are
likely betting that consumers will be motivated to upgrade so they can listen on
more devices, said Ted Cohen, managing partner of TAG Strategic.
"At a certain point you'll get frustrated and go, 'Oh, what the heck,'" he said.
(Reporting by Julia Love)
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