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With New Music Streaming Service, Amazon Challenges Apple and Spotify

With New Music Streaming Service, Amazon Challenges Apple and Spotify
Accelerating the industry trend toward more flexible pricing after years of sticking to $9.99 subscriptions, Inc launched a full-fledged music streaming service with subscriptions as low as $3.99 per month for owners of its Amazon Echo speaker.
Similar to Spotify and Apple Music, a vast catalog of songs on demand can be accessed by the new streaming service, called "Amazon Music Unlimited." Subscriptions cost$9.99 for non-members, $7.99 a month for members of Amazon's Prime shipping and video service and subscriptions to play music on the Echo cost $3.99 per month. Amazon will continue to offer Prime members a limited streaming service for free.
To set it apart, Amazon is counting on the Echo, a smart speaker that responds to voice commands, as it plunges deeper into the crowded streaming field. Prompting many to predict that voice will become a key way users interact with technology - and music is central to the device's appeal, the Echo has become a surprise hit after it was released broadly last year.
For or listening on the Echo, an elaborate system of voice controls have been built by Amazon. Steve Boom, vice president of Amazon Music said that a key source of growth for the music industry would be such smart home devices, believes the company.
"The first phase of growth (in music streaming) was driven almost entirely by smartphones. We believe pretty strongly that the next phase of growth in streaming is going to come from the home," he said in an interview.
Signals that the music industry is beginning to accommodate consumers who are unwilling to pay $9.99 per month and the company's reputation for undercutting the competition is reflected by the low price for Amazon's streaming service. Label executives have been reluctant to budge on price having watched revenues plummet from the CD era. But as streaming accounts for more of the pie, they have come under pressure.
Boom said he is optimistic that the new prices will expand the market.
"We're moving music away from a one-size-fits-all approach," Boom said. "We are the ones who have been pushing this the hardest."
A business model that has left Pandora and Spotify struggling to turn a profit, streaming services must pay a majority of their revenues to rights holders. But analysts say that the boost to Prime is well worth it and Amazon can afford to take a loss on music streaming.
Analyst Jan Dawson of Jackdaw Research said that the perception that Amazon will increasingly offer basic media options through Prime while selling additional subscriptions for consumers who want to go deeper is suggested by the premium music service, following the release of a standalone video service.
"It's just making Prime that much stickier," he said.
Amazon is also hopeful that users would be kept tuned in by artificial intelligence. Amazon has also woven artificial intelligence into the system so users can request songs that fit a particular mood or search with lyrics and recommendations based on listening habits have become a staple of streaming services.
Kintan Brahmbhatt, director, Amazon Music said that data from the Echo has taught Amazon much about the language of music.
"You can ask for Michael Jackson by saying, 'Play music by the King of Pop,'" he said. "It's smart enough to know that's what you meant."
Ted Cohen, managing partner of TAG Strategic said that the assumption that consumers will be motivated to upgrade so they can listen on more devices is what Amazon and the labels are likely betting on despite the low price for Echo-only subscriptions.
"At a certain point you'll get frustrated and go, 'Oh, what the heck,'" he said

Christopher J. Mitchell

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