Six months ago, Amazon launched Music Unlimited, its on-demand music service, designed to compete against the likes of Spotify and Apple Music. Six months later the company hasn’t shared any subscriber numbers, but it is very bullish about its prospects, encouraged by the success of its Echo smart speakers, which are deeply integrated with its music offerings and in millions of homes across the country. “I see us as one of the top global streaming services,” Steve Boom, the vice president of Amazon Music said about the service’s future in an interview at the company’s office in San Francisco. “I expect us to grow faster than everybody else.”
While the incumbent streaming services have captured early adopters with powerful discovery algorithms, personally curated playlists, and big-name exclusives, the latest wave of streaming services like Amazon Music Unlimited and Pandora Premium are using simplicity to target music fans who may not have gotten on board with streaming yet. For Pandora Premium, that means creating the most intuitive streaming app to date; for Amazon Music Unlimited, that means tackling what many in the music industry see as the next major space for streaming to take off — the home.
“I expect us to grow faster than everybody else.”
As we discussed in our overview of Music Unlimited, Amazon Echo owners can ask Alexa to play the latest song from their favorite artist, or play music from a certain decade of a band’s catalog (“play Metallica from the ‘80s,” for example), and the Echo will respond accurately. These are features that aren’t available when using Spotify or other services with the Echo. And even if you aren’t subscribed to Music Unlimited, you can sign up for the $4-a-month Echo-only tier simply with your voice. Boom sees both of those moves as long-term game-changers for the company.
“Making it simple, whether it’s from the subscription process... or ways that you can ask for music and get to music quickly, it’s game-changing,” Boom said. “It’s opened up premium streaming to new categories of customers that aren’t ready to deal with some of the complexities of downloading apps or using their web browsers.” While streaming has been dominated by smartphones for years, the music industry is looking to the home, and subsequently the car, as the next two areas for major growth. According to The Information, Amazon expects to sell as many as 10 million Echos in 2017, and projections from the investment firm Mizuho have Amazon moving over 40 million Echos in 2020 alone, creating an enormous market of potential users.
Some in the music industry, like Sonos co-founder and former CEO John MacFarlane, expect that by 2021, 1 billion people will be paying for streaming music worldwide. But unlike operating systems in the mobile and PC industries, the streaming market is unlikely to end up in a duopoly. Big players like YouTube, Spotify, and Pandora have thrived in the ad-supported streaming world for years. Now Apple, Amazon, and Tidal have jumped into music streaming, with Facebook reportedly not far behind.
In the latest report from the IFPI, there were an estimated 112 million people using paid streaming accounts at the end of 2016, and the paid streaming market grew 60 percent year over year. With that growth rate and the diversity in the market already, there are a number of players that could each be pushing 100 million paying users by the time the 1 billion figure is reached, pushing the music industry to new heights. Boom echoed that sentiment.
The paid streaming market grew 60 percent year over year
“[Streaming is] becoming a mainstream activity, but I don’t know if paying for it is quite mainstream yet,” Boom said. “There’s a whole class of customers that really aren't paying for it. I really believe that premium music streaming will touch a lot more people than [digital] music purchasing ever did. Yes, a lot of people might have bought one or two tracks, and I’m kind of excluding those, but if you think about people who really bought music, I think you’ll have way more people paying for a premium subscription because just the value is there.”
While Amazon hasn’t joined the growing class of streaming services and labels that have come out against exclusives, it did say it was strongly in favor of windowing — industry parlance for restricting an album to a certain service or premium tier for a short period of time — and Boom noted that we may see different types of exclusive content going forward.
“The industry has really moved away from exclusives and is moving toward this concept of premium windows — we’re very strongly in favor of that. We’ve been in favor of that for a long time,” Boom said. “Different services may have different types of content alongside the studio release that may be exclusive to them. There were a couple ‘making of’ Katy Perry’s newest video for ‘Chained to The Rhythm’ and we have those exclusively on Amazon, and that was great. But again, it wasn’t the actual studio release, it was the content around it, and I think you’ll see more and more of that kind of stuff.”
Amazon does have a long-term exclusive deal with Garth Brooks, and while Boom says the company is very happy with the deal, he intimated it would take a special set of circumstances to get Amazon to do another deal like it. “Garth is his own label. He’s unique. We wouldn’t say we wouldn’t do another deal like that. If there’s another artist of that stature who owns his or her own masters and all that kind of stuff who’s looking for deep partnership we’d certainly entertain it. But I don’t expect exclusives to be — they were a big story last summer, here we are 10 months later and they’ve kind of fallen off the radar already. I don’t really expect them to be a huge story going forward, at least not when it comes to the studio releases.”
Despite declining to disclose any subscription numbers for Music Unlimited (although Boom did say they are “very good”), Amazon is gearing up for an international expansion of its music service. But don’t expect a rapid expansion like Amazon did with Prime Video, which went live in more than 200 countries at the end of last year — Amazon Music Unlimited will likely take a more traditional approach to its expansion, adding additional countries over time.
Music streaming may have gained popularity on the smartphone, but it won’t stay there forever
As for the more “traditional” streaming features like a Discover Weekly competitor, Amazon wouldn’t commit to anything, but Boom said it would listen to its users. “We listen to what our customers want, and if what they want is a weekly playlist of some sort, then that’s something that we’ll offer,” he said.
While the nontraditional approach of Amazon may not get it on equal footing with Spotify or Apple Music in the immediate future, Music Unlimited is set up for a long-term run on the back of the company’s most popular device ever. Music streaming may have gained popularity on the smartphone, but it won’t stay there forever. To reach that 1 billion user goal by 2021 — which the music industry is on target to hit — companies are going to have to make streaming a lot more appealing to the common music listener. Amazon is betting that removing the user interface and replacing it with voice control may be the key.