Home » Amazon, Apple, Disruptive Innovation » Amazon Prime Music Just Set Streaming Music’s Price

Amazon Prime Music Just Set Streaming Music’s Price

28 June 2014

From The Street:

For much of the last year, companies have been scrambling to create their own Pandora and take a piece of the growing — but poorly monetized — music streaming market. Amazon may have just stumbled upon the solution.

In a message to Amazon Prime members in mid-June, Amazon unveiled Prime Music, a collection of more than a million songs and hundreds of playlists available to Prime members through the Amazon Music app. The service is accessible through Amazon’s Kindle Fire and Fire TV products, Android and Apple iOS devices, Samsung Smart TVs and speakers and just about any Mac or PC.

. . . .

So what separates Prime Music from Pandora One or Apple’s iTunes radio and its recently purchased Beats Music? Prime customers are already paying for it, bundled with a bunch of other services including two-day shipping of Amazon marketplace products and Prime video streaming of movies and television shows.

. . . .

Apple attempted to work around them with with iTunes Radio — and its failing attempt to use streaming to sell music downloads — but it discovered the streaming audience doesn’t care about buying music. Only about 2% of iTunes Radio listeners ever hit the “buy” button to download a song.

. . . .

All of the above are just an attempt to wring money from music that consumers are loathe to pay for anymore. The number of music download purchases dropped for the first time in 2013, according to Nielsen and has just continued to plummet in the first half of 2014. Interactive streaming like that offered by Spotify and Beats Music increased volume to 34.28 billion streams in the first quarter of the year from 25.44 billion streams during the same period in 2013. With music executives putting 1,500 streams at the equivalent of a full digital album, streaming equivalent albums have increased by 10.1 million units so far this year as download sales dropped by roughly 9 million units, according to Nielsen.

. . . .

When Amazon raised the price of Prime for new members from $79 a year to $99 earlier this year, it faced the same question that’s still puzzling Pandora: Where’s the value? Amazon responded by securing proprietary streaming content for its video service and tapping into its supply of cloud-based music content to cobble together a streaming service. It may not be quite as intricate as what Pandora offers or tailor its playlists to a user’s profile as the Music Genome Project does, but it’s a streaming service that existing Prime customers get as a freebie and that new customers see as added incentive to sign on for Prime service.

Prime Music does what the Fire Phone can’t and what Apple’s iTunes infrastructure won’t: It enhances the overall value of the service. Amazon’s Fire products have had a tough time keeping pace with Apple even at lower prices, but the integration and bundling of all of Amazon’s offerings — marketplace, video, audio, e-books, etc. — under one payment and on several different devices is making a strong pitch to consumers. Amazon isn’t pleading with them to ditch Netflix, Pandora or even iTunes on-demand services, but showing them how much Prime can offer under one roof.

. . . .

Amazon, however, took the extra step of setting up an all-inclusive pricing scheme and shoving everything else into it. Instead of streaming music and bringing in zero for it while hoping consumers find it in their hearts to download the occasional album, Amazon gave itself a base membership price to work with and built up. It’s not unlike what Costco did by making membership fees the foundation of its retail model, and much of that bulk shop’s growth and ancillary offerings including tire shops, auto sales and travel services are bolstered by that base consumer investment.

Link to the rest at The Street

PG says the music business started experiencing technology disruption with the introduction of the iPod and iTunes in 2001. No two disruptions are the same, but it’s instructive to study the development of different disrupted business.

Amazon, Apple, Disruptive Innovation

21 Comments to “Amazon Prime Music Just Set Streaming Music’s Price”

  1. I wonder when Amazon will announce that it has bought Netflix? Later this year or next year.

  2. “Amazon may have just stumbled upon the solution.”

    First, Amazon isn’t a “stumbling upon” kind of company.

    Second, is anyone making money from music these days? Musicians, song writers, producers?

    Just curious.

    Dan

    • Second, is anyone making money from music these days? Musicians, song writers, producers?

      Labels.

      Well. Them, Dr. Dre, and Jimmy Iovine.

      But that’s about it.

      Shout out to indie acts like Butch Walker and Roger Clyne, though.

      • Nine Inch Nails, Radiohead, Ok Go, Cake, Prince, Gretchen Wilson, Oasis, White Stripes, etc.

        Keep in mind, a lot of ‘indie’ bands and musicians are working within their own record labels that they created. However, this is still considered ‘indie’ or ‘self published’ in the sense that they are no longer trapped in the machine of the big record labels.

        Plenty of musicians making a great living by doing their own thing much like authors are with self-publishing.

  3. “PG says the music business started experiencing technology disruption with the introduction of the iPod and iTunes in 2001. No two disruptions are the same, but it’s instructive to study the development of different disrupted business.”

    Actually, PG, the music industry experienced tech disruption with the first file-sharing networks gaining mass appeal (Napster being the real “starter” for example). From the moment the RIAA discovered the internet was being used to circumvent paying for their music, they’ve scrambled (mostly like Keystone Kops) to stop the bleeding (while still making record profits).

    Apple only gets credit for being the first “giant” to force the RIAA to accept pricing and distribution terms, not for disrupting an industry. Internet “pirates” get sole credit for throwing the RIAA into a frenzy.

    MP3′s were around before Apple even thought about their first i-whatever (as were many other personal MP3 players).

    • Good points, Travis.

      I chose the iPod/iTunes because they made music easily portable and simple to purchase online. The two were nicely integrated and easily accessible with no technical knowledge necessary. And, as you point out, Apple was able to force reasonable pricing.

      • Since I’ve been in the high tech industry for almost two decades, I, of course, immediately hated the iPod and iTunes from a technological point of view (still do).

        However, I championed them (Apple) when it came to forcing the labels to not only accept reasonable pricing that Apple KNEW customers would instantly gravitate toward, they forced them to accept selling individual songs.

        Personally, the breaking up of albums was possibly more important to me as a consumer. I’m sure you remember the old days of being told CD’s would “soon” be $9.99 just like LP’s and cassettes, and feeling the sting of having to pay $15.99 for a CD when you only really wanted three or four of the songs on it. Cassette “singles” were never really an option, and 45′s were already well on their way to being phased out, with 33 LP’s right behind them.

        I’m already enjoying the Prime Music (devoted Prime member here) features, and I’m hoping Amazon provides good competition to Apple for consumer music choices.

        Annoyingly useless disclaimer: I was in a metal band during high school and college, and just like now as an author, I and the other members were always dreaming of signing with a “real” record label to prove that we were professionals, with dreams of selling millions of records and earning millions of dollars. Even after finding out how awful the record labels treated their talent.

        The gut punch was when we learned Metallica band members were on a $3000/week “allowance” while on the Justice For All… tour, yet the album had already turned platinum multiple times. That’s when I started hearing rumblings of just how ugly the contracts were, how the band didn’t really own the rights to their own music (should have not been shocked after Michael Jackson bought the Beatles catalog, right?). When our favorite bands started talking about how their real income was from playing live shows, not record sales…

        (Keep in mind, this was back in the Commodore64 / IBM PC (DOS) days and a BBS was the only “internet”)

        Right. Sorry for wall o’ texting with blather. You can sense you’ve become my secret online BFF because of your awesome site (and the awesome people who come here to discuss, almost entirely without the trollish behavior exhibited at other gatherings).

        • Oh, man, if there were a “like” button here, I’d have clicked it. I was never in band, but from high school on I wanted only to be a rockstar writer, complete with mad bookdeals and tours like whoa. Lately, every day, I thank my lucky stars it never happened that way.

          And you know, that you bring them up, I wonder if all that Metallica info had something to do with how vociferous they were against Napster and all. I remember that was about when I stopped listening to them (having only just started, really; I thought Load was awesome — but I’m not metal).

          • Ah, I could write an entire book on my relationship with Metallica (not a personal one, the closest I ever came to meeting one of them was having a VERY attractive, very skimpily dressed female friend snag backstage passes and about six of us guys immediately stripped off our freshly purchased Metallica t-shirts and heaped them on her to get them signed).

            The Napster thing completely and totally ruined my love for the band. I’d been to at least four concerts, purchased the VHS tape “Cliff ‘Em All” at least five times (that’s how much we watched it!), owned a dozen or more t-shirts, tons of patches for our Levi’s jean denim jackets, spent upwards of $50 for the import “picture disc” vinyl albums (the ones with the awesome graphics drawn right on the vinyl), purchased vinyl, cassette, and then CD’s of theirs…

            And then one day my name came up on a huge list of Napster users who had been downloading their music “illegally.” It was one of the worst insults I’ve ever suffered to be trashed by Lars as a thief, a loser, a criminal, after spending at least $1000+ (that’s just me, the other four in our band were crazy about Metallica, not to mention the dozens of friends who were as well) on their @$#%.

            *sigh*

            On a personal note, the day Metallica became a non-entity in terms of music was when Cliff Burton was killed in a tour bus accident. He wrote the majority of music for the And Justice For All… album, but after that (Black album and beyond), you can tell that he was the real force behind their music.

            Man… this whole discussion has made me sad =(. I learned how to play a guitar and my friends formed a band with me because of Metallica…

            • I agree everything changed without Cliff. But I am from Michigan and grew up in the same area as Jason Newsted. It was a pretty big thing to see him sign on with the band. After the whole Napster fiasco I was happy to see he left the band.

              He went to a different school growing up than I did so we never met till much later. He came in for dinner with his family a few years ago to a restaurant I was cooking at. One of my rare times of celebrity worship and what not, I got to spend a few minutes talking to him.

              It’s a bit crazy the number of people who come out of this area in Michigan.

              • I felt bad for Jason as every hardcore fan seemed unable to accept Jason is not Cliff. I’ve heard that even the other members never really treated him as an equal (but that’s all gossip, no matter how well it aligns with my thoughts).

                After “Death Magnetic,” I’m convinced there’s nothing left of the band worth being a fan for. However, I still want Hetfield’s ESP Explorer (the custom one that runs about $5k).

  4. I’ve used Pandora for years and before that Rhapsody. Now it’s Prime music and I love it.

    In addition because of Prime I’ve dropped Netflix which hurts me because I’ve had it a long time. I hate to not support them but Amazon’s streaming video I don’t need both and I’ve already paid for a year of Amazon’s multifaceted prime services.

  5. I’m not sure about this argument, honestly, if only because if Prime Music weren’t part of the Prime program, I’m not sure I’d use it. I’ve already got Spotify, and lately — especially after the acquisition — have been considering giving Beats a try, but less so Amazon. I mean, I’ve been using Amazon Music for years, mainly because it’s the only online streaming solution that can match my entire music collection (like 50k songs). I might have once paid more for it ($20 per year, maybe), but that’s nominal to me.

    Then again, I also admit that any time Amazon asks me to pay a little more for something, it’s usually only because that something is awesome and I definitely want it. I went with them over iTunes Match, e.g., because iTunes Match only accommodates 25k songs, and I laughed past that number back in college.

    • It’s hard to say no to Amazon. And it’s not even like he’s THAT friend we all had that talked us into doing really, really dumb things we didn’t really want to do because of some enticement (from “I’m gonna beat you up if you don’t” to “come on, I’ll buy the beer if you do this with me.”

      When they first brought out their Prime video service, I laughed and said Netflix would own them (heck, I even thought for a while that Blockbuster would compete until we all learned just how backwards that company truly was). And for a while, it was true. Over time, Amazon increased their catalog, and I started watching a lot of TV shows and old movies. Then came HBO, and I’ve already made it through The Wire completely (for the third time), and getting ready to trip back through The Sopranos.

      And, as a person with around 90k songs, I know almost exactly where you be coming from ;).

      It is hard to break my Pandora habit, but I’m starting to. Slowly.

      • I just updated my Mac’s Amazon Music app and fired it up. The interface is way nicer than before — very Spotify-esque, with dark tones.

        The problem is I don’t know if I’d call it streaming. It appears some of the songs are classified as “Prime,” and you can “add” them to a playlist. I guess I’m just more used to Spotify Premium ($10 per month. Play any song — in library — at any time on any platform/device), and then Pandora (which bases next song played on the musical characteristics of the songs previously played).

        But I see a lot of “Buy this album” on Amazon Music. Consider that along with the fact that it’s only music that’s at least six months old (as Mashable, I think, reported), and I think there are far better and more useful options available.

        And helluva collection, Travis. It’s funny, I think mine would have kept growing, but now I have Spotify and I’m like, eh. Although I did recently notice that I think iTunes quality of local songs sounds better than Spotify quality of streaming songs. Which may be obvious to some, but wasn’t to me. Still learning!

        • Wife and I gave it another run last night. Seriously impressed with the selection of Prime music. However, a very favorite ‘band’ we both love (Groove Armada) isn’t part of the Prime thing yet, which is sad. But not a deal breaker. I have a feeling the catalog will grow.

          We’ve been Pandora junkies for a long time, and there’s a lot of features I like (like giving a thumbs up to a song so it will play again + introduce more music/artists like it). Amazon hasn’t quite caught up yet (a number of artists in my playlist I clicked on to find “more like this” but there were no suggestions, which really only means the service hasn’t been up long enough to generate enough suggestions).

          Liking the interface, and I like how all of the digital music I’ve ever purchased gets mixed in as well. I especially like how I can set up custom playlists. I’m not familiar with Spotify, so no idea how their UI is set up.

          My only real concern is what the artists/bands are being paid… (though I’m assuming that the record labels are getting the lion’s share)

          • You should give Spotify a shot. I think there are free options. I had both it and Pandora One for a while, and there’s some cross-functionality. Spotify, for example, has a radio function (at least at certain subscription levels) where you can choose a song or artist and it will give you a radio station based on that. It’s a lot like Pandora that way, though I don’t know if it has the same degree of analytical chops as Pandora.

            What Pandora didn’t have was the ability to simply search the song you want and listen to it, straight off. And I don’t think it pulled my local library in (Spotify does).

  6. Everything is in place for Amazon to roll out an eBook subscription plan.

    The $100 Prime fee could cover it just like it covers video and music.

    Amazon probably knows pretty well what people consume under their Prime plan. I mainly consume the shipping at no additional cost. I have watched a few videos to see how it works, tested the music, and never borrowed a book. But the shipping is easily worth $100 to me.

    Others may mainly consume videos, and the $100 may be a good deal for them.

    The true winners would be those who consume lots of music, video, and books. I don’t know how many such well balanced people are out there.

    • I don’t know about one person getting that much use out of all those things but I could certainly see a family finding something for everyone.

      • With Prime’s neat thing about sharing with a few others within your household, it means there are four adults in ours that use everything from the free shipping to the videos to the music (now that music is offered).

        • Correct. I forgot about the family deal. Each member of a family of four could get their choice of services for an average cost of $25 per year. That’s hard to beat now. Throw in a book subscription and it’s even harder to beat.

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