Amazon's New Music-Streaming Service Goes Up Against Spotify, Apple

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Amazon will give users access to a catalog of tens of millions of songs.
Amazon will give users access to a catalog of tens of millions of songs. Credit: Amazon
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Amazon has plunged into the crowded field of music-streaming with its own service that significantly boosts the catalog of songs available through its popular Echo speakers, and offers a pricing option for Prime members that undercuts industry leaders Spotify and Apple.

The Music Unlimited subscription from Amazon will be available for $9.99 a month, in line with offers from Spotify and Apple Music, but Prime customers would pay $7.99, or $79 a year, Amazon said in a statement Wednesday. The Seattle-based e-commerce giant plans to offer a family-subscription plan later this year.

The new offer will give Prime members access to a catalog of tens of millions of songs, up from about 2 million previously, Amazon said, and thousands of hand-curated playlists and personalized stations. Listening to music through the Echo voice-activated speaker was already one of the most popular features of the hit device.

The new expanded selection, including features that allow listeners to search by lyrics, artist, decade and more, will likely only tighten bonds between users and the Echo's voice recognition technology, Alexa.

Amazon is also offering an Echo-only subscription plan for $3.99 a month, providing access to all of the music catalog on a single device.

The company is counting on the Echo, a surprise success when it was introduced two years ago, to help set its music offerings apart from those of established powerhouses and new entrants like Google. Music has always been an integral part of the Echo and Amazon is willing to lose money on a cheap offering to attract more shoppers to the device, with the ultimate goal of embedding all of its services more deeply in people's everyday lives.

Amazon Echo.
Amazon Echo. Credit: Amazon

With the Echo, Alexa can be summoned to order a pizza, check the weather or, of course, buy items from Amazon. Available in three versions including the Dot and Tap, the Echo is central to Amazon's strategy for a connected home and as a way to boost membership in Amazon's Prime subscription program, which includes delivery discounts, video streaming and online photo storage.

Amazon is betting that a stand-alone music streaming service will also enhance Echo's appeal to non-Prime members, ultimately whetting their appetites for further offerings from the online retailer.

People who are happy with the music service are likely to upgrade and get the full benefits of Prime membership, making them more loyal to Amazon with their overall spending. Amazon introduced a stand-alone video subscription service in April, another potential gateway to Prime membership.

The announcement from Amazon is also a boon for the music industry. The growth of subscription services has boosted music industry revenue for the past year and a half, offsetting declines in sales of physical and digital albums. U.S. streaming revenue grew 57% to $1.6 billion in the first half of 2016 and accounted for almost half of industry sales. Ad-supported streaming accounted for just 12% of that total.

Record labels still aren't satisfied with their deals with many services, which they say offer too much for free. The labels have been pushing Spotify, the biggest streaming service, to limit some new releases to its paid tier, according to people familiar with the matter. Bringing in new competitors like Amazon could put more pressure on Spotify in negotiations.

-- Bloomberg News