Amazon(NASDAQ:AMZN) delivers a lot of value to consumers through its Prime 2-day shipping and streaming content offerings.The company recently made big bets on Prime by adding large amounts of video content and now the addition of music makes Prime very appealing for consumers. The value proposition delivered by Amazon's Prime service has become very compelling for consumers and will lead to robust growth in subscriber additions.

Prime should grow
Amazon stated that it has tens of millions of Prime subscribers from whom the company collects $99/year. Amazon doesn't disclose much more than that, butPiper Jaffray stated that Amazon has around 21-23 million subscribers, and is growing at around 40% year-over-year. So the company's Prime service is estimated to grow rapidly, and now the company's addition of Prime Music will keep existing subs satisfied and provide a strong value proposition for newer ones. 

The company's just announced Prime Music will feature more than 1 million songs without commercial interruptions and this will be added to Amazon's Prime offering at no additional cost. And Amazon intends to add more music to this offering over time, and users can download the music and play offline as well on mobile devices without incurring data plan limitations for certain users. However, the free music streaming service of Amazon is very similar relative to other players.

Amazon is stepping into a very competitive space where companies like Pandora, Spotify, Apple(NASDAQ:AAPL) all have big music libraries and customer followings as well. Spotify has more than 20 million songs for its 40+ million subscribers.  Apple has in excess of 20 million users for its iTunes radio service and has grander ambitions for the Internet music streaming space as evidenced by its $3 billion buyout of Beats. Apple is almost certain to ramp up its marketing of the music streaming business of Beats in its large ecosystem. 

However, most consumers generally start out as subscribers to Prime for the free 2 day unlimited shipping offer in place, but over time Amazon added more and more services including consumers to borrow ebooks, watch video content including Amazon Originals, and now music streaming. All these services are additive to the main purpose behind Prime and will lead to newer customer additions for Prime. 

Subscription dollars are better
Right after Amazon hiked its price for Prime a few months back, the company struck a deal with Time Warner's(NYSE:TWX.DL) HBO to add high-quality originals to its Prime Video service for $300 million per year. HBO has roughly 30 million domestic subscribers and is widely considered the best maker of premium original content, and thus the high price tag for old catalog content from HBO. Also, future HBO shows will be added to Amazon Prime after 3 years of their launch on HBO. 

Also, the focus on growing Prime service would enable Amazon to grow its subscription revenues which are inherently a lot more attractive to a company due to their stable and predictive nature. And Amazon can make calculated investments based upon future new customer additions as well. Amazon can possibly bring down its shipping costs as a percentage of revenue to more acceptable levels by the company and its investors. 

Earnings growth
Amazon continues to plough back almost all the profits into its business. The company's high rate of reinvestment into its core business as well as new business lines is eating up a large portion of its operating profits but growing its moat. And this trend has been on-going for many years.

Investors were very hopeful in the last quarter that Amazon might be taking its earnings more seriously --pushing the company's stock price above $400, but were disappointed after the company reported earnings. However, when the company does decide to slow down its rate of investments for long-term growth, Amazon's business model can deliver significant net earnings.