Consumer Electronics

Why Amazon Is Willing to Launch a Half-Baked Music Service


(Corrects to remove the title of a song from the first paragraph.)

Prime MusicPhotograph by Amazon via Business WirePrime Music

All the recent news about the Everything Store seems to be about something that isn’t available. The latest example, Amazon.com’s (AMZN) entry into the crowded field of streaming music, was launched Thursday as a freebie bundled into Amazon Prime even though it won’t have any current hits for several months. Even when it does offer hit songs, Prime Music won’t have anything from the catalog of Universal Music Group (VIV:FP), the world’s biggest record label. It seems incomplete compared with rival streaming services.

While the removal of some books from the publisher Hachette (MMB:FP) and some DVDs from Warner Home Video (TWX) has been viewed as Amazon’s way of gaining leverage in business negotiations, the shortcomings in its music service don’t seem to be a choice. The company offered Universal a lump sum in exchange for access to a selection of its catalog, but the label insisted on more money, and the two sides reached an impasse. The complete absence of new releases from Prime Music likewise stems from the failure to reach deals with record labels, leaving Amazon to secure more limited licenses.

So there is little reason to believe that Prime Music will lure people away from Spotify or Rdio. In this way, it bears some resemblance to Amazon’s streaming-video service, another perk thrown into the Prime bundle that offers fewer videos than Netflix (NFLX) and attracts fewer viewers. But Amazon’s streaming businesses aren’t intended to stand on their own—they are incentives to purchase its Prime memberships. A survey of Amazon customers conducted by Consumer Intelligence Research last year found that Prime members spend twice as much as customers who don’t subscribe to the service.

Anyone primarily interested in streaming music is probably unlikely to see Prime Music as the reason to fork over the annual $99 for Amazon Prime, and Amazon so far hasn’t been able to match terms that have made new releases and other desirable tunes available through rival streaming startups. So why rush to release an inferior product before completing those negotiations?

It could be that Amazon has set its own deadline. Next week will mark the release of a new Amazon product that is universally believed to be the company’s first smartphone. It’s quite possible Amazon wanted to have a music service in place as a way to make its new device stand out.

Amazon’s history with hardware has been about releasing devices that will help it sell specific types of media: the Kindle for books, the Kindle Fire for books and video, and Fire TV for video and games. The streaming-music industry is fixated on smartphones. Amazon could preinstall a Prime Music app onto its devices, offer free trials, or exempt that traffic from data plans. But if it wants to make any music-related announcements next week, it has to have a music service in place. An incomplete one will have to do for now.

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $358.14 USD
    • -2.70
    • -0.75%
  • VIV:FP
    (Vivendi SA)
    • $18.46 EUR
    • 0.20
    • 1.08%
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