Reportedly, Amazon.com Inc. (AMZN) is set to ramp up its Prime offerings by launching a music streaming service. Per Buzzfeed, the service will be available to Prime’s subscribed members this summer and will work on a number of mobile devices and computers. The service will be offered free of charge to members paying $99 per year for an Amazon Prime subscription.
Amazon has been putting in every effort to boost digital media sales and attract new users. The latest service will expand the company’s content lineup and make Prime service more appealing. Music streaming is expected to lure more subscribers to the $99 Prime offering, which was raised from $79 in March. Prime already has nearly 20 million subscribers.
The music streaming catalog will however consist of songs that are six months old and older, with no new releases offered. As per rumors, Amazon has already signed agreements with Sony Music Entertainment and Warner Music Group.
Music streaming is becoming increasingly competitive, attracting leading technology companies. Apple (AAPL) has just acquired Beats Electronics for its ad-based music-streaming service iRadio. Other players in the market include Spotify, Pandora (P), Rdio, Rhapsody, Google’s All Access, Microsoft’s (MSFT) Xbox Music and Sony’s (SNE) Music Unlimited.
If rumors turn true, the music streaming service can give a boost to Amazon Prime. While its restricted catalog would be a major disadvantage as against other streaming competitors like Pandora, Rdio and Spotify that offer more recent launches the fact that it will be free to existing subscribers makes it attractive.
Additionally, in the subscription-based streaming market, service providers are finding it difficult to grow their paid user base. However, Amazon will start off with a huge and loyal customer base, so it may be able to gradually wean out customers from other services.
As revenues from music downloads continue to decline, subscription-based services are expected to be the next life-line for the music industry. According to ABI Research, streaming music services are expected to generate $5.0 billion in revenues this year. The analyst firm forecasts revenues to grow to $46.0 billion by 2018, which presents a significant growth opportunity.
Given the long-term prospects in the music streaming business, the offering from Amazon will expand its footprint and could ultimately offset the secular decline in digital music sales.
Amazon currently holds a Zacks Rank #3 (Hold).
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