On Wednesday evening Amazon unveiled its music streaming service Music Unlimited in the US, while announcing that the UK launch will happen later this year. The online retail giant is known for disrupting markets, but could this move be one step too far?
Music streaming is a lucrative market. In the US, it will soon represent over half of all recorded revenue from the sale of music in the country. But the industry is hugely competitive. Music streaming in Europe is dominated by Apple Music and Spotify, while Pandora has the most US consumers subscribed to its services, and is making moves to transition from free to paid via its own newly launched subscription service.
The industry is also known for big tech failures on a frequent basis; Tidal, while still operating, failed to live up to its hype, and music streaming startup Crowd Mix only reached beta testing before going bust, despite a $20m investment.
Altogether this puts up an extremely challenging landscape for Amazon to enter. Despite its reputation for disrupting markets, launching into music is a vastly different challenge compared to grocery or retail.
However, as people move away from physical media like CDs, DVDs and books to keeping all of these in a cloud based format, accessible anywhere, future growth lies in the battle over who has the best tech eco-systems. If Amazon is to compete with other tech giants such as Apple, Facebook and Google, and maintain its position as a one-stop-shop for everything, it needs to enter this market.
The biggest challenge lies in Amazon’s musical credibility. Apple bought Beats and hired top musical talent from across the globe to gain some credibility. While Amazon has heritage in selling and delivering albums and CDs, it will need to up the ante on this if it wants to compete.
Clarkson and co. certainly don’t carry a lot of credibility in this area, so a combination of exclusive deals with artists – a tactic competitors have started using – and good quality, compatible software will help. But where Amazon has appeared to be particularly savvy is in the audiences it is targeting.
The pricing of the new service is in-line with Apple Music, Google Play Music, Spotify and Tidal at $9.99. But for Prime members, this price drops to $7.99 and for owners of the voice controlled Echo speaker it is even cheaper at $3.99.
These discounts are obvious indications that Amazon sees its initial growth and adoption coming from its Prime subscribers and users of its own products. Amazon has direct access to a global subscriber base of 65 million people worldwide. In comparison, Spotify has 40 million paid subscribers and Apple Music 17 million.
The drop in price may prove a draw to Prime members who already subscribe to a rival music service, but are looking to cut costs.
Ultimately though, the success of the new service lies in whether it can match Apple Music and Spotify for quality and accessibility. So far, Music Unlimited’s sound quality has been reported to be high, but Amazon has been vague about how many songs it offers on its service. ‘Tens of millions’ is as close as it has got. If Amazon is going to convince music lovers to switch, it needs to be clearer on just what they’re offering.
However, if Amazon can give users the seamless experience they are used to with their competitors at a lower price, and identify and secure the right exclusives with the right artists, then Amazon’s Music Unlimited could be a formidable competitor in this space.
George Roberts is client services director at Five by Five