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Putting Amazon Music's 55 Million Customers Into Perspective

By Evan Niu, CFA - Jan 24, 2020 at 8:00AM

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That includes users of all the tiers that Amazon offers.

For a company known for keeping key metrics close to the chest, Amazon.com (AMZN 3.66%) surprised investors this week by disclosing how many Amazon Music subscribers it has. The last vague disclosure was when the company said in 2018 that it had "tens of millions" of paid subscriptions. The company has now confirmed that it has over 55 million customers worldwide, Amazon's first official customer disclosure for its music streaming business.

Let's put that figure into perspective.

Amazon's Echo Studio on a cabinet.

The Amazon Echo Studio. Image source: Amazon.

Amazon has a music plan for everyone

Spotify (SPOT 4.00%) and Apple (AAPL 4.08%) are the two leaders in paid music streaming, with the Swedish company leading the way with 113 million premium subscribers as of the third quarter. Apple provides irregular disclosures, mostly when Apple Music hits a new milestone. Services chief Eddy Cue said last summer that Apple Music had reached 60 million subscribers.

"We're proud to reach this incredible milestone and are overwhelmed by our customers' response to Amazon Music," VP of Amazon Music Steve Boom said in a statement. "Our strategy is unique and, like everything we do at Amazon, starts with our customers."

However, there's a pretty important caveat: Amazon's metric includes all users of all tiers, not just paid subscribers. The tech giant offers more tiers of service than rivals, including an ad-supported version and a bare-bones service (2 million songs) that is included for free with Prime membership. Amazon introduced a high-fidelity Amazon Music HD service late last year, which leverages the high-end Echo Studio that delivers high-fidelity audio. Amazon even offers an affordable single device plan for just $4 per month, which can only be accessed on a single Fire TV or Echo device.

Only Amazon Music Unlimited is directly comparable to Apple Music or Spotify Premium, although Spotify also has a free tier. Amazon Music Unlimited is typically priced at the same $10 per month as similar services, but Prime members can get it for a discounted $8 per month. Amazon Music Unlimited subscriptions have jumped 50% over the past year, according to the company. Expectedly, it did not specify exactly how many of those subscriptions it now has.

Questions remain

In other words, Amazon Music's 55 million customers can most appropriately be compared to Spotify's monthly active users (MAUs), of which there are 248 million. Spotify has 141 million ad-supported MAUs using the free tier, which means there are about 6 million inactive premium subscribers. (Apple Music does not have a free, ad-supported tier.)

That's assuming that Amazon Music customers are listening on a monthly basis, and the company did not elaborate how it defines an Amazon Music customer. Investors can safely infer that Amazon isn't simply counting all Prime members as Music customers, since Amazon has over 100 million Prime members, so there must be some listening activity to qualify.

Amazon is clearly interested in growing its music streaming business (and advertising revenue). The company is undoubtedly making progress, but, as is often the case, Amazon's disclosure raises more questions than it answers.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
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Apple Inc. Stock Quote
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Spotify
SPOT
$112.97 (4.00%) $4.35

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