According to a new report from Billboard, Amazon is in talks to launch a free, ad-supported streaming service. This free music tier would put them in direct competition with Spotify, which is currently the only music streaming platform that offers a free version.
Billboard says that Amazon will market the service through their voice-activated Echo devices. The catalog won’t be as big as Spotify’s. However, Amazon is reportedly offering to pay some labels on a per-stream basis, regardless of advertising revenue.
As the world’s largest e-retailer, Amazon can afford to take a hit on the costs of a free music service. This “loss leader” strategy has long been a favorite of the company. Remember, Amazon deeply discounted books as it built its initial business. Amazon is now a diverse conglomerate that operates in everything from cloud computing to streaming television to e-commerce, affording them leverage to try out costly new services.
Even before this move, Amazon has had a foothold in the music business. They currently offer a limited music catalog through Prime Music for Prime subscribers, who pay an annual $119 membership for free shipping, Prime Video and other perks. Subscriptions are also available for Amazon Music Unlimited for a range of prices depending on Prime membership and devices.
X Marks the Spotify
As strictly a streaming platform, Spotify can not afford to leverage any part of its business like Amazon has. Complicating matters is the fact that Spotify is also a publicly traded company whose investors expect returns.
Still, Spotify has a large advantage in the market share. Globally, the company currently boasts 116 million free users, along with 96 million paid subscribers. Compare that to Amazon Music, which told The Verge last year that it has “tens of millions” of subscribers (the company doesn’t offer specific figures).
Apple Music, which has a reported 56 million paying subscribers, is currently the second largest streaming service. However, outside of Beats 1 Radio, Apple does not offer any free streaming. Ostensibly, YouTube would be another competitor, but the video giant prioritizes ad revenue over subscriptions.
Music Revenues Rebounding
Regardless of how or when Amazon launches its new service—which could be unveiled as soon as this week—it’s good news for the music industry as a whole. As streaming numbers continue to grow (there were one million new adopters per month during 2018), the music industry has quietly rebounded from years of declining revenues.
Global music revenue was about $19 billion in 2018, according to one report, an 8.2 percent increase over the year before. Streaming was up 29 percent and brought in $9.6 billion. And thanks to new technologies and services, there’s never been a better time to be an independent artist. “Artist Direct” revenue climbed to $643 million in 2018, a 35 percent increase.
These figures are why Amazon is looking to get even deeper in the music game. Only time will tell if they can do to Spotify what they did to Borders.