Why Amazon Music is primed for success

Amazon Music announced today that it will increase the number of songs available on its Prime Music tier from 2 million to 100 million.It’s a big deal, but it’s not That That’s a big deal when you consider the actual value of those extra 98 million tracks. With around 2.5 million new songs uploaded to streaming services every month, the simple fact is that most people don’t listen to most catalogs. Prime Music already has a ton of the most valuable tracks, and now it has all of them, plus tens of millions of streaming fragments. However, directory augmentation is actually very important, but because of what it stands for rather than what it actually is.

No more dark horses

MIDiA first identified Amazon as the dark horse of streaming music back in the mid-2010s, but today, Amazon Music’s purebred pedigree is unquestioned. It has the third-largest number of subscribers of any Western streaming service, and will likely overtake Apple Music’s second-place spot even sooner sometime in the next twelve months. But what makes Amazon Music so important to the music industry is not just its size, but its audience segmentation. That’s a good part of the reason it just unlocked an additional 98 million tracks for Prime Music subscribers.

Prime Music has come a long way

When Amazon launched Prime Music, it didn’t get a lot of support from music rights holders. So much so that Universal Music wasn’t licensed until 15 months later (making Amazon the only global-scale streaming service to successfully launch without the participation of the Big Three). At the time, Prime Music seemed risky to rights holders: Just when subscriptions started gaining traction, a service that followed could offer consumers a free music subscription experience. So the copyright holder insists on limiting the directory size to ensure it doesn’t risk cannibalizing potential 9.99 subscriptions. Over the years, copyright holders have unlocked more catalogs, but today’s announcement is a real step change.

Segmentation-based approach

So what has changed? The market did it. Now, with subscriptions maturing in most of the world’s larger music markets, rights owners are shifting their focus from overall positive growth to a more segmented approach to unlock growth in other mature markets. It’s not an easy task when they offer roughly similar licenses and the same catalog to all their streaming partners. But Amazon has managed to create a silk wallet out of a sow’s ear, launching a range of different streaming products and deploying them strategically to different markets. If you need convincing, check out their list of product availability. While most streaming services have built audiences around mobile-centric millennials, Amazon has managed to build an audience that looks very different. 34% of Prime Music users listen to music on smart speakers, compared with 14% of consumers overall, and 22% of users are over the age of 55, compared with 9% of Spotify users.

compete with others

Amazon Music isn’t just competing with other streaming services, it’s competing About them. By doing so, it expands the addressable market for streaming, helping mature markets continue to grow strongly (and YouTube Music has a similar effect at the other end of the age bracket, converting young subscribers at scale). It was in the later stages of streaming growth that more segmented partners like Amazon and YouTube became so important to music rights holders. Unlocking an additional 98 million tracks reflects both this increased importance and the understanding among rights holders that enhancing Prime Music will grow the market around the likes of Spotify, not at their expense.

another super power

Beyond that, Amazon Music has another superpower: emerging markets. These regions have long been considered drivers of future growth, but in many cases they are also elusive. Markets like India and China have hundreds of millions of free streaming subscribers, but tens of millions of paid subscribers (in China, for example) and millions in India. Ad-supported revenue lags significantly behind subscription revenue, even in Western markets, but in markets with lower GDP per capita, ad spending is even smaller. In markets like Brazil and India, Prime Music proved to be a pleasant middle ground, balancing scale and ARPU. As premium subscriptions take time to find an audience, Amazon looks set to become an increasingly important partner in some key emerging and mid-market markets.

When Amazon first launched Prime Music, its value proposition was: pay free shipping and get “free” music service, or as Amazon puts it, as a member benefit. Now though, Prime isn’t just free shipping, it’s an ever-expanding family subscription in which entertainment now plays a central role (the recently announced Amazon Music Live/Thursday Night Football lineup is an example). As we enter a global recession, consumers may be buying less, and free shipping subscriptions may seem like an unaffordable luxury. However, music and video services with the advantage of free shipping suddenly seem like a value-for-money proposition. Prime may not be recession-proof, but music and video certainly reduce its exposure. Prime Music’s value equation began to change, as did Amazon’s role in the global music business. Five years from a dark horse to a top player is not an easy task.

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