Tag Archives for " Amazon Prime "
It was probably only a matter of time, but it now looks like the first of many streaming music price wars has truly broken out. In a reaction to Amazon entering the streaming market with its Music Unlimited service, Google has extended the free trial period for its Play Music service to 4 months, making a new subscription average of about $6.66 over the course of the first year.
In response, Spotify reintroduced its offer of just $0.99 for the first 3 months of premium streaming access. This deal was previously offered during the summer and resulted in about 2 million new subscribers per month. The problem, of course, is keeping the paid users after they subscribe, and as noted in previous posts, as many as 25% of streaming subscribers jump from free plan to free plan when their trial period is up. In order to counter that, Spotify has also introduced a $9.99 for 3 month play to lapsed users in order to entice them to reapply.
Apple Music is the only service that hasn’t deviated from its normal plan of a free 3 month trial period before the user is charged $9.99 per month.
This pricing war started last month when Amazon introduced it’s service at $7.99 to Prime members, and $3.99 if locked to one of its Echo devices. The catch, of course, is that you need a $99 per year Prime subscription, so it was really more expensive than the other services, but the perception by the public was that it was cheaper on a per month basis.
The trial period is the only bit of leeway that the streaming service actually have to play with, since the monthly price of $9.99 is locked in by their agreements with the major record labels. Despite many in the industry calling for a decrease in the monthly price in order to attract more paying subscribers, the labels have refused to budge. We’ll see if the current round of deals is enough to boost the subscription rate to the anticipated level, or just leads to more price wars down the road.
The major record labels are adamant about keeping the price of a music streaming subscription at $9.99 per month, regardless of the platform, so it was a great surprise last week when Amazon announced that its new Amazon Music Unlimited service was priced at $7.99 per month for Amazon Prime members. It turns out that the labels haven’t softened their pricing stance at all, as Music Business Worldwide reported that Amazon will actually end up subsidizing the other 2 bucks when all is said and done.
It turns out that Amazon is expected to be paying out from between $5.50 to $6 each month to record labels and artists for each $7.99 Prime subscriber, and an additional $1.50 a month to publishers and songwriters. When you figure in administration, marketing, staff and infrastructure costs, that means that most if not all of that monthly fee has pretty much been eaten up.
So what’s the company’s end game?Amazon might be pulling an Apple here, losing money on software in order to sell more hardware and make a much higher profit. While Echo and Dot seem to be hits and are the leading products in this new category, there very well may be more hardware devices from the company on the way . Using music streaming as a loss-leader to make it’s hardware more attractive has been tried by many companies though, particularly in the mobile space, and only Apple has been wildly successful with the strategy.
The price subsidy could also be another way to increase Prime memberships. While Amazon doesn’t publish the actual number of subscriptions, insiders have reported it to be around 60 million, and when you consider that each one is paying $99 a year for the privilege, you can see why anything that might increase that number could be valuable. Still, it seems like a stretch to think that the average music user will say to himself, “I really want to subscribe to this music service because of this great price. Let me pay just $99 more so I can buy in.” [Read more on Forbes]
Amazon has finally launched it’s long awaited stand-alone streaming music service and it’s called Amazon Music Unlimited. On the surface it has a number of interesting features that differentiate it from the other major streaming services, but one has to wonder whether potential users will find them compelling enough to subscribe.
Perhaps the service’s biggest feature is price. If you’re already an Amazon Prime customer, Amazon Music Unlimited is available for just $7.99 per month or $79 per year, undercutting the norm of $9.99 per month charged by most other services. If you’re not a Prime customer however, you’ll still be charged the customary $9.99 per month.
If you happen to own an Amazon Echo, Echo Dot or Amazon Tap device, the price is even lower at $3.99 per month, but music playback only works on that device. If you want to receive the full Amazon Music service on your phone, for instance, you’ll still need to pony up for the full Unlimited tier at either $7.99 monthly if you’re a Prime member, or $9.99 if you’re not.
On the surface this seems pretty interesting in that a lower price for streaming is what major industry consultants have been advising for years. Even back at the peak of the CD boom, the average music buyer never purchased $120 worth of music per year, as is the case now with a $9.99 per month streaming plan. Though there’s been a decent amount of streaming penetration at that price point, it’s still only 10% or less in some territories, according to industry pundit Mark Mulligan. Potential subscribers that might not ever buy at $9.99 are more likely to change their minds if that monthly threshold was lower.
That’s why Amazon Music Unlimited’s $7.99 per month price point looks so inviting. It’s a step in bringing that monthly fee more in line with the expectations of the greatest number of users.
The problem is that this price is really a mirage.
You have to be an Amazon Prime member in order to have access to the $7.99 price, and this is after you’ve already payed $99 for your Amazon Prime subscription for the year. And, as a Prime member, you already have Amazon’s Prime Music service available to you for free, so why would you want to pay the extra 8 bucks a month for something that you’ve already paid for?
To be fair, Amazon Music Unlimited is different from Prime Music in a number of ways. There are a lot more songs available (Amazon will only say its in the “tens of millions” as compared to Prime Music’s two million), there are curated playlists, behind-the-scenes artist commentaries, and a new app. Is that worth the extra money per month? It will be interesting to see just how many of the estimated 60 million Prime members say, “Yes it is!” [Read more on Forbes]