Amazon.com (AMZN 0.03%) may be ready to pump up the volume when it comes to streaming music services.
Re/code is reporting that the leading online retailer is in talks with the major record labels to roll out an on-demand tunes platform along the lines of Spotify. This may not seem like a lot to get excited about since other tech giants have struggled in trying to make a dent in this market, but we're also talking about Amazon and its cutthroat ways.
Tech giants have tried to charge a premium for their music services, but the clincher here is that Amazon reportedly wants to roll this out later this year as a feature that's included in its wildly popular Amazon Prime loyalty shopper program, where customers pay $79 a year for unlimited two-day shipping of Amazon-warehoused items. They also get monthly Kindle rentals and a growing library of digital video at no additional cost. Tacking on music makes sense, and it could be a game changer for the industry.
Pandora (P) and Sirius XM Radio (SIRI -1.26%) wouldn't seem to be in Amazon's crosshairs at the moment, but isn't this ultimately a land grab for music buffs? If folks can stream Amazon's eventual service on their mobile devices or Bluetooth-enabled car entertainment systems, won't it eat into Pandora usage and Sirius XM subscriber levels? This would naturally be a bigger threat to the ad-supported free Pandora platform. An Amazon Prime customer who was paying before the music feature was added may view this as a complimentary perk, and commercial-free will trump commercials nearly every time.
Sirius XM is backed by a thicker moat given its proprietary content, but it has never been challenged by an ad-free service that is effectively free for existing Prime shoppers. The market is expanding quickly enough to support many growing companies, but we can only ultimately listen to one platform at a time.
Will Amazon's service see the light of day? Under the current scenario it's unlikely to happen. Labels won't go for it. Why would someone pay Spotify $10 a month if Amazon would cost less even before we get to the rest of Amazon Prime's goodies? Offering music outside of the purchased tunes and digital locker that Amazon presently offers would devalue it, and unlike video, where Amazon can turn to lesser TV shows and older movies, you can't roll out an incomplete music service.
However, keep in mind that a few weeks ago, we had Amazon pondering bumping the price of Prime to $99 or $119. Introducing the higher rate as it rolls out streaming music would kill two birds with one hike. Customers would see that they're getting something more, and music labels would no longer feel that they were being devalued if they triggered the increase.
Keep an eye -- and one day an ear -- on Amazon.
