Amazon looks to debut Echo-only streaming music service, undercut industry pricing by half
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.
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.
Comments
what?
I already have the Echo and would gladly trade in a $10/month subscription for half.
Maybe Amazon is willing to lose money on this music service in order to get customers hooked on Echo.
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.
What musician or music company wants to cut their revenue in half????
That's called stupidity.
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.
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.
most people who go for this will be paying Spotify for another subscription anyways.
(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.