Amazon looks to debut Echo-only streaming music service, undercut industry pricing by half

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in iPod + iTunes + AppleTV
In a move that undercuts the entire streaming music industry, online retail giant Amazon is reportedly developing $4 or $5 per month subscription service that could see release next month. The catch: the service only works with Amazon Echo hardware.




Citing industry sources, Recode reports Amazon is currently in talks with music labels to introduce the cheap, unlimited streaming service exclusively on its Echo line of internet-connected speakers. Affordable monthly fees is the main draw, though Amazon has yet to decide whether to set pricing at $4 or $5 a month.

The supposed Echo-only service would be marketed alongside a traditional $10-per-month product also said to be in development. Unlike the cut-rate version, Amazon's full-featured standalone streaming product is expected to work on a variety of devices, including smartphones.

In the early days of music streaming, companies experimented with offerings priced at around $5, but those services usually came with stringent limitations on song skipping or number of registered devices. Consumer response was tepid, as users seemed willing to spend the extra money for full control over their listening experience. Industry competitors, led by Spotify and Pandora, ultimately settled on a $9.99 per month sweet spot, a price point more recently adopted by Apple Music.

As noted by today's report, portability is one of the main draws of any streaming service. For many subscribers, the ability to keep an essentially unlimited music library in your pocket is worth the price of entry. Amazon's plan, at least for the cheaper $4 or $5 a month version, is to add value to a family of devices used mainly at home (although the Amazon Tap is a portable bluetooth speaker). Echo already supports a number of streaming apps including Pandora, Spotify and Amazon Music, the latter of which provides Amazon Prime members free access to a comparatively small music library.

Amazon is reportedly targeting a September launch window for both standalone streaming services.
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Comments

  • Reply 1 of 27
    No problem. I don't believe in subscriptions. There are many free services out there. Also the cable system here has free Music Choice service. If I really like a particular song, I'll either buy the CD or purchase through the Apple Music Store (or whatever they call it these days). I'm not worried.
    mike1
  • Reply 2 of 27
    mike1mike1 Posts: 1,817member
    macseeker said:
    No problem. I don't believe in subscriptions. There are many free services out there. Also the cable system here has free Music Choice service. If I really like a particular song, I'll either buy the CD or purchase through the Apple Music Store (or whatever they call it these days). I'm not worried.
    Agreed. I don't see myself paying another monthly subscription. If I want a song, I'll buy it for a buck or so or the occasional album. I would never listen to 99% of the music I'd be paying to subscribe.
    baconstangwilliamlondon
  • Reply 3 of 27
    latifbplatifbp Posts: 544member
    Like any good clown act Amazon is throwing in a dancing monkey routine
    EsquireCatsaddicted44nolamacguy
  • Reply 4 of 27
    latifbp said:
    Like any good clown act Amazon is throwing in a dancing monkey routine

    what?
    cnocbui
  • Reply 5 of 27
    So much for the Spotify lawsuit against Apple. They have a far more worrisome competitor in Amazon. 

    I already have the Echo and would gladly trade in a $10/month subscription for half. 
  • Reply 6 of 27
    Nah I will pass. I am very happy with AppleTV + AppleMusic subs at the moment. My home entertainment is connected to 5.1 surround speakers.
    jdgazlatifbp
  • Reply 7 of 27
    How will this generate enough revenue for Amazon (via the record labels) to pay the musicians a reasonable fee? Seems unsustainable...

    Maybe Amazon is willing to lose money on this music service in order to get customers hooked on Echo.
    williamlondon
  • Reply 8 of 27
    jungmarkjungmark Posts: 6,643member
    Not sure how the music industry will agree unless they get a cut of Echo sales. 
  • Reply 9 of 27
    brucemcbrucemc Posts: 1,499member
    I don't know the music biz, but they seem really concerned about not just the payments, but also the perception of value.  Hard to see the labels jumping onboard a service that seeks to devalue music of their artists. 
    latifbp
  • Reply 10 of 27
    SpamSandwichSpamSandwich Posts: 30,690member
    ..,Maybe Amazon is willing to lose money on this music service in order to get customers hooked on Echo.
    That's the idea. They'll use this as YET ANOTHER loss leader to grow their own hardware sales to encourage more impulse buying.

    Amazon never has been and may never be about huge profits. They are about growth at a break even or by taking a loss, something that violates common sense business practice, but is the perfect scam for Wall Street. Bezos is no idiot, he used to work on Wall Street and knows their game.
    edited August 2016 goodbyeranch
  • Reply 11 of 27
    IF Amazon prices this music streaming service at HALF the current industry average prices, doesn't that mean music companies and artists are going to get only HALF their usual revenue?

    What musician or music company wants to cut their revenue in half????

    That's called stupidity.


  • Reply 12 of 27
    rogifan_newrogifan_new Posts: 3,769member
    sog35 said:
    Individual streaming music plans should start at $4.99. And family plans at $7.99.

    Thats the only way you will get the massive adoption you need to make it insanely profitable. Totals prices are too expensive. $10 for Apple music and $15 for family plan?  That's 50% more expensive then Netflix!!!  

    The music industry needs to realize its better to get 200,000,000 subscriptions at $5 each than 50,000,000 subs at $10 each. Once you get massive adoption then you can slowly increase the price. Cause at that point people will be 'addicted' to the service.
    Insanely profitable for who?
  • Reply 13 of 27
    rogifan_newrogifan_new Posts: 3,769member

    ..,Maybe Amazon is willing to lose money on this music service in order to get customers hooked on Echo.
    That's the idea. They'll use this as YET ANOTHER loss leader to grow their own hardware sales to encourage more impulse buying.

    Amazon never has been and may never be about huge profits. They are about growth at a break even or by taking a loss, something that violates common sense business practice, but is the perfect scam for Wall Street. Bezos is no idiot, he used to work on Wall Street and knows their game.
    AWS is making money though so that's keeping investors happy. One reason the stock is where it is is because Amazon has started showing (small) profits now. I believe it's coming from AWS.
    SpamSandwich
  • Reply 14 of 27
    IF Amazon prices this music streaming service at HALF the current industry average prices, doesn't that mean music companies and artists are going to get only HALF their usual revenue?

    What musician or music company wants to cut their revenue in half????

    That's called stupidity.


    One possibility is for Amazon (undisclosed) to subsidize this service -- for example:
           Customer pays $5
        + Amazon pitches in another $5
        = Record Label gets the same amount as under a traditional $10/month plan

    For this scenario to be viable, Amazon would have to estimate they'd get another $5 in e-commerce business from the customer due to having an Echo in the house. That would reimburse Amazon for its music subsidy.
     
    cropr
  • Reply 15 of 27
    So much for the Spotify lawsuit against Apple. They have a far more worrisome competitor in Amazon. 

    I already have the Echo and would gladly trade in a $10/month subscription for half. 
    And you're gonna carry that Echo with you in your car, and your office, and when you're in a different room, right?

    most people who go for this will be paying Spotify for another subscription anyways. 
  • Reply 16 of 27
    nolamacguynolamacguy Posts: 4,758member
    not getting echo hype from tech bloggers. limited functionality. typical described use case: listening to headlines in the living room (oh goody?). claims of big sales, yet....no numbers released. so why is this thing considered anything other than a writer's fleeting iPhone-killer?
    edited August 2016
  • Reply 17 of 27

    Profitable for musicians, record labels, and Apple.

    200,000,000 subs x $5 x 12 months = $12 billion in annual sales
    50,000,000 subs x $10 x 12 months  = $6 billion in annual sales

    They could DOUBLE their revenue by dropping the price to a reasonable level. Very few want to pay $10 a month for music. But drop it to $4.99 and you will get massive adoption.
    Except you're ignoring the fact that streaming services pay royalties. So, lets say the average royalty per user is $4, and that doesn't change regardless of subs. (Total guess on royalties, I honestly have no idea what the true average is...)

    (200,000,000 x $5) - (200,000,000 x $4) = $200,000,000 x 12 months = 2.4 billion per year
    (50,000,000 x $10) - (50,000,000 x $4)  =  $300,000,000 x 12 months = 3.6 billion per year 

    And we aren't even taking into consideration the extra expenses of maintaining a customer base that is 4x the size, which would be substantial. 

    And with 200,000,000 subscribers, every additional penny of royalty fees will cost you $24,000,000 a year. 

    Now, I'm not saying you are wrong, but I don't think they came up with the $10 a month with giant dollar signs in their eyes.
  • Reply 18 of 27
    jbdragonjbdragon Posts: 1,988member
    I don't listen to enough music to make it worth $10 a month for Apple Music or anything else. At $5, maybe, but since I'm already a Amazon Prime Member, I'm already getting Amazon Prime Music for no extra cost. It works great for my needs.
  • Reply 19 of 27
    jdgazjdgaz Posts: 341member
    kevin kee said:
    Nah I will pass. I am very happy with AppleTV + AppleMusic subs at the moment. My home entertainment is connected to 5.1 surround speakers.
    Apple TV is great for music. High end equipment, multi zone playback, and we have our photos as screen saver. An excellent experience.
    williamlondon
  • Reply 20 of 27
    latifbplatifbp Posts: 544member
    IF Amazon prices this music streaming service at HALF the current industry average prices, doesn't that mean music companies and artists are going to get only HALF their usual revenue?

    What musician or music company wants to cut their revenue in half????

    That's called stupidity.


    One possibility is for Amazon (undisclosed) to subsidize this service -- for example:
           Customer pays $5
        + Amazon pitches in another $5
        = Record Label gets the same amount as under a traditional $10/month plan

    For this scenario to be viable, Amazon would have to estimate they'd get another $5 in e-commerce business from the customer due to having an Echo in the house. That would reimburse Amazon for its music subsidy.
     
    Still don't believe music execs would want their product devalued in this way in the eyes of their fans/customers 
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