PrimeMusic

In yet another step in the evolution of Amazon Prime, Prime Music was announced this week.  Prime started as a shipping club, then to a loyalty program, and now it’s clear – Prime is THE business model.  More on that in another article.

To get more insights on Prime Music, I had the opportunity to ask Fasial Galaria, former EVP of Business Development at Spotify a few questions.  I’m fortunate enough to get to collaborate with Fasial at Alvarez and Marsal, where he is a managing director in our European team.

Q1:  What is your initial impression of Amazon’s music service? 

Fasial —  I’d love to give it a proper try however to date Amazon has only launched it’s music streaming service in the US, (vs Spotify in 56 countries and Deezer in over 180) so I’ll have to wait until the service is launched properly over here in the UK to try it out. That said from reading the specs it looks like the service is being positioned as bundled feature of Amazon Prime rather than a competitor to the likes of Beats, Deezer or Spotify.

The Amazon service only has around 1 million tracks and synchs with the MP3s the user has already bought from Amazon. However, the catalogue is weak compared to the 20+ million tracks available on leading on-demand platforms and even Pandora the on-line radio service has a catalogue of over 2 million tracks. Amazon has content from Sony (not surprising since Michael Paull, VP content joined from Sony where he was head honcho of Digital) and Warner, however crucially has failed to license content from the largest music label Universal Music Group and so misses a significant body of contemporary and current content.

Technically it appears to do the basics required – creating playlists, available as an app on portable devices or in the browser and caches content for off-line playback. Streaming quality tops out at 256Kbps vs Spotify’s 320Kbps which will make a difference to some audiophiles…

In aggregate, I appreciate the Amazon service is ad free and is a first launch, but in its current form I think it is best considered a nice feature of Prime that sits nicely alongside Instant Video and two-day shipping rather than a serious competitor in the music streaming market.

Q2:  What do you think the key(s) will be for Amazon to differentiate itself in the streaming music business?

Fasial — The on-demand music streaming space is already very competitive and there is probably little space for YAMS (Yet Another Music Service). That said if we can agree that Apple makes content available to sell its devices, whereas Amazon comes at it from the other way i.e. Amazon subsidies devices to sell more content, then I think Amazon is uniquely positioned to offer compelling bundled services and could create a significant market for streaming music (up from the 30 million subs worldwide today).

Q3:  Are there strategic reasons why labels and catalog owners would join up with Amazon, or is it purely a revenue evaluation?

Fasial — In the last couple of decades the relationship between the music labels and innovators such as Apple and MTV has been fraught, with the labels coming off second best and failing to participate in the value created. This time around you’d expect the labels to want to ensure plurality of competition in the streaming market at least at the regional level to ensure that the content providers were not beholden to just one new digital  streaming service.

Q4: Other than catalog quality and size, how will this competitive space be decided?

Fasial — Three things:

(1) The user experience – you’re only a click a way from a better experience; and

(2) pricing — for subscription music services the current $9.99/month leaves a lot of money on the table from users who would pay something less even if the service was not as comprehensive as the all you an eat $9.99 services

(3) Ultimately whether it’s movie/tv, gaming or music streaming it’s moving content around the internet to the user’s device. User’s don’t want to pay multiple providers and so the ability to provide a simple easy to understand bundled content offer will trump many individual subscriptions

Here are my own personal thoughts:

  • I thought there would be a new application, so I was in the application store looking for “Prime Music”.  Silly me — just go to the “music tab” and there it is.  I think this tab just got updated on my device (Kindle HDX).
  • Finding and adding music was easy.  Lots of suggestions.
  • I fly a lot and that poses one of the great limitations of streaming music (or at least of Pandora, my other experience).  Most (not all) of the Prime Music library can be downloaded to your Kindle device.  WOW!  Limited by the amount of memory on your Kindle, still easy enough to load up before a flight for some tunes.
  • There are no advertisements!
  • It’s device independent.
  • But thinking about devices, won’t Prime Music work well with an Amazon phone??  I’m sure the timing on this announcement is closely tied to the Amazon phone announcement.
  • The big (and obvious) limitation is the 1 million song library including the Sony Corp and Warner Music.  But guess what — that will change and improve, and my guess is in a steady manner.  Just a contract away from dramatically adding to selection.  And you know how Amazon feels about having deep selection.
  • I think that over time, Amazon Prime Music will be one of top two streaming music services.  The synergies with the retail business and seen as a part of the business model, instead of “the” business model, will allow Amazon to offer value that is difficult for other business models to replicate.
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