Did you know that Amazon owns the world’s biggest paid-for music streaming service?
Cards on the table.. that claim relies on a bit of a technicality.
Based on Amazon’s $6.4bn revenue in 2016 from ‘retail subscription services’, the latest estimates suggest that the company has around 65m Prime members worldwide.
These Prime subscribers – who pay an annual fee for speedier delivery of goods and other perks – automatically gain access to (and therefore technically become customers of) Prime Music, the ad-free, limited-catalogue tier of Amazon’s music streaming offering.
That same service will cost non-Prime members $9.99-per-month, while a budget $3.99-a-month offering will get you all the music… locked to a single Amazon Echo speaker.
The Echo, and its voice-assistant Alexa, is Amazon’s not-so-secret weapon against the likes of Apple Music and Spotify – and has been designed to put even the most technologically inept consumer at ease.
Ask Alexa to ‘play the song that goes “drinking fast and then we talk slow”‘, for example, and she will instantly oblige with Ed Sheeran’s Shape Of You.
Such accessibility has made Echo a smash hit: in January, CIRP estimated that over 8m units of the device had been sold in the US since its public launch in July 2015.
“Echo was installed in around 6% of US homes by the end of last year, less than 18 months after it arrived on shelves.”
Echo was therefore installed in around 6% of US homes by the end of last year, less than 18 months after it arrived on shelves.
What’s more, for the music business, Amazon Music Unlimited – and its symbiotic relationship with Echo/Alexa – is defining itself rather differently to Spotify and Apple Music.
Senior label types tell us that rock and country artists skew far higher on Amazon’s platform in the US than elsewhere – surely good news for those who fear such genres are destined for marginalization as hip-hop, EDM and pop dominate global streaming charts.
Steve Boom (pictured inset) is the VP of Amazon Music in San Francisco – and the exec in charge of making the big calls around the development of Amazon’s service.
In an exclusive interview with MBW, Boom discusses Amazon’s ambitions in digital music, streaming’s potential to grow globally, the tricky subject of artist exclusives and free vs. paid- plus the small matter of how we’re all going to listen to music in future…
According to the latest stats from MiDIA Research, the worldwide paid-music streaming audience is believed to have topped 106m people in 2016. How much bigger can that get, and what needs to happen to accelerate that growth?
We believe it can get a lot bigger. We’ve already seen a pretty dramatic shift in the fortunes of the industry over the past two or three years as a result of streaming becoming more popular. And we think we’re right at the beginning of the story.
One of the biggest things that needs to happen [for optimum growth] is that streaming needs to get a lot easier for consumers.
“One of the biggest things that needs to happen [for optimum growth] is that streaming needs to get a lot easier for consumers.”
If you look back into the old world, whether you flipped on your radio or stuck a CD in the tray, music was a lot simpler for everybody to use.
With streaming, you have to download mobile apps, then go through the process of subscribing [with credit card details] – stages that make it much harder.
Part of the excitement around Echo and Alexa has specifically been around how much easier it makes things.
In which ways specifically does Alexa make that process less painful?
One is how you subscribe. Let’s say you ask Alexa to play the new song by Imagine Dragons and Alexa tells you it’s not available in Amazon Music Unlimited – but that for $3.99-per-month you can subscribe. All you have to do is say ‘yes’ to begin your free trial, and the music starts playing.
Because Amazon has your credit card [details] stored – because people have that trusted relationship with us – it’s the easiest way to subscribe to music that has ever existed. Bar none.
People in the music business get super-excited by that because it takes all of the difficulty, all of the friction, out of streaming music.
“Because Amazon has your credit card [details] stored – because people have that trusted relationship with us – it’s the easiest way to subscribe to music that has ever existed. Bar none.”
[Alexa] allows music into our lives in a much more pervasive way. When you use something every day and it’s effortless like that, of course you’ll be willing to pay for it.
There are countless examples of how a voice interface connected to a speaker is changing the way people interact with music in a very positive way.
Not only is music steaming very early, but the adoption of products like Echo is very early as well – and we’ve already seen profound results.
Who are Amazon Music Unlimited’s potential customers and how do they compare to those of – for example – Apple Music and Spotify?
Amazon is pretty large and continues to get larger – so our potential customers are everybody.
That being said, at our foundation we’re an e-commerce company. So our customer base tends to start at young adults and go older from there.
The young family is kind of the sweet spot for Amazon as a company – adults with young children. That’s when people become very loyal Amazon customers because their lives change in a fundamental way; they start spending a lot more money and the convenience and trust of Amazon becomes more and more important.
“Our charts are not as heavily dominated by urban music as Apple’s.”
If you look at how people consume music on Amazon, it’s different to the other services. In the US, you’ll see a much stronger presence of rock and country compared to the other platforms. That’s all forms of rock – whether classic rock, alternative rock, indie rock etc.
Our charts are not as heavily dominated by urban music as Apple‘s. Their target customer seems to be a particular music genre lover, and our charts reflect a more diverse taste in music.
As we grow, and as Alexa grows, our audience will change. We will bring new demographics into music streaming who are not currently paying for it today.
Since we entered music streaming with Prime Music, our focus has been on growing the streaming market segment – not on trying to take people from other services.
How did you pitch your multi-tiered pricing to labels and publishers? why do you think they agreed to license a $3.99 Echo-only service, for instance, when they haven’t accepted other mid-price on-demand products?
To their credit, when we went to talk to the labels, they knew about Echo and already loved it – they were believers.
We tailored the product to the device perfectly; that was part of the pitch. We knew it had to offer a full catalogue music service, because when you talk to Alexa you want to be able to ask her anything.
I think the labels have evolved a lot and saw the scale of the opportunity this presents. They’ve been great partners in this process.
There’s a lot currently being written about the flawed business model of music streaming for the likes of Pandora and Spotify. What’s your view, and why does it work for Amazon?
[Music streaming] is a business that requires scale, given the economic structure of the industry.
It doesn’t work for companies who don’t achieve that scale – but it works for us.
“Streaming doesn’t work for companies who don’t achieve scale – but it works for us.”
Amazon’s been committed to music for a long time. Next year will be the 20th anniversary of us selling our first CD.
Our customers have a trusted commerce relationship with us, and that makes us a natural player in this industry.
Is the digital download doomed in the next three years?
I don’t know about the death throes or the downward spiral, but we’re definitely in a decline.
It’s important to recognize that streaming is a really good substitute for downloads. It’s not as good a substitute for vinyl and CDs; those formats offer things streaming does not.
Streaming is now bigger than downloads, and it’s growing much faster than downloads are declining.
Are you considering opportunities above the $9.99-per-month level (ie. ‘super-premium’ offerings or cross-media subscriptions) and how could Amazon’s unique market position play into that?
We’re very customer-driven and if we find customer demand in additional areas then we’ll certainly explore them.
Amazon Music Unlimited, to some level, is evidence of that.
After we launched Prime Music, we spoke with out customers and asked what they liked and didn’t like about the service – and the thing we heard most was: ‘We’d love even more music and we’d be willing to pay a premium for it.’ That helped us think about launching a standalone service.
In terms of anything above $9.99 level, we’ll wait and see for what our customers tell us what they want to do.
Where does Amazon stand on artist exclusive deals – whereby acts commit material to a single streaming service for a period of time?
The industry definitely seems to be moving away from exclusives, less than a year on from when there was all the activity around this.
“The industry definitely seems to be moving away from exclusives, less than a year on from when there was all the activity around this.”
The Garth Brooks deal for us was a unique opportunity; he runs his own label, and he was looking for an exclusive partner – a much deeper partnership than just distributing his music.
We have a very big country music audience so it was a very natural fit, and we’ve been very happy with that deal.
There aren’t many Garth Brooks [type artists] out there, in stature or in situation, so if one of those presented itself would we do it again? It would depend on the situation.
The industry has great concerns over free streaming music – particularly on YouTube. Does Amazon have a view on what you would like to happen to the streaming market in that respect?
I do think paid streaming has gotten to a size and level of consumer awareness and acceptance now that it didn’t have a few years ago.
And with that level of awareness and acceptance, it’s appropriate for the industry to be re-evaluating the dichotomy between free and paid.
“it’s appropriate for the industry to be re-evaluating the dichotomy between free and paid.”
The goal should now be to accelerate the growth of paid streaming so that the industry as a whole grows – and that means more money for songwriters and recording artists.
Personally I think it’s a good thing the industry is taking a serious look at [free vs. paid].
It feels like there’s forward momentum on that front right now.
What are your plans with Amazon Music Originals? You’ve previously created some low-level acoustic and Christmas-themed releases on your own ‘label’. Could we see a major league Amazon Originals Music release from an artist in future, just as we’ve seen in movies & TV?
What’s happened in video with Netflix and Amazon Video is unique to the video industry and that’s the way those services have evolved. I wouldn’t draw a tight parallel with music.
Our approach with [Music] Originals has been about two things: providing stuff to our customers we think they would uniquely like, at the same time as giving a voice to developing artists.
“we’re not building a record label here like they’ve built a TV studio down in Amazon Video.”
We have put a lot of marketing behind those projects, which give exposure to artists at a level that they otherwise would frankly not get. Hopefully some of the listeners we [provide] will become lifelong fans.
But, as I say, I’d be very careful about extrapolating from the [Amazon Originals] video example into music.
It’s a fair question, but they’re not the same thing: we’re not building a record label here like they’ve built a TV studio down in Amazon Video.
Describe the potential of voice recognition to change the face of the music business from your point of view…
I think it can have a profound impact on the music industry. Most importantly, it can bring consumers closer to music in a way they haven’t experienced in a long time.
One of the really interesting things about Echo is that it’s communal. Most people have them in their kitchen, their living room or another family room.
And that’s kind of cool, right? Because in the [first] digital age, music became very personal. It moved out of the home and stayed on your phone.
We think we’re entering a new phase of the streaming music business.
“in the [first] digital age, music became very personal. It moved out of the home and stayed on your phone.”
Phase one was all about the smartphone. All growth was about having music in your pocket at all times. And that’s been an amazing thing.
But there’s a much bigger world out there than just smartphones. We think we’ve already entered phase two of listening, which takes place in the home.
Consumers have shown that voice is the preferred interface for interacting with music in the home – and we believe that will also happen in the car.
Music streaming’s been locked on the smartphone for a long time. What if it now becomes unlocked – out into the world? How big can that get?
Voice is key to unlocking that potential.Music Business Worldwide
