Wilds of the Amazon (Prime)

Like many college students, I have an Amazon account which I use to buy books, gear for my room, and anything else that strikes my fancy. I love Amazon so much that I have my own Student Prime account, which gets me faster shipping and a library of movies via my laptop. However, Amazon is broadening its horizons, in terms of media. In fact, Amazon has recently announced its new unlimited music streaming service, catapulting it forth into the music industry. While this is definitely a business savvy move for the company, some of its intended practices seem a bit off.

The biggest issue that is causing analysts to shake their heads is Amazon’s fairly low price for unlimited access. The online superstore and shipping giant has announced that its premium streaming service will set you back around $8 per month, as opposed to the typical $10. For the time being, consumers should be rejoicing, as they’re currently on the war path to saving $24 per year if they switch from their current premium streaming service. When you’re the one paying Amazon, this is not a bad deal at all.

The bad deal is actually for Amazon itself. While the major labels can be slimy, there are reasons why they do ask that premium streaming services within the realm of Spotify and Apple Music be $10 per month. With a $10 per month fee, there is margin left over – once fees to the label, publisher, artist, who all else is paid – for the company itself to generate profit. At Amazon’s current consumer-friendly $8, they’re going to be expecting losses.

Now, I’m all for cheaper premium streaming; college students and cheap products go together like wine and cheese. However, from a business standpoint, it did seem confusing to me, too, at first, that a company as big and influential as Amazon would purposefully take on losses in such an important field as the music industry. Despite the initial confusion, Amazon may be onto some things that could boost their business:

  1. They may be trying to model Apple, selling less software so that their firmware can see a rise in sales.
  2. This may be used to attract more potential Prime members. Once Amazon is satisfied with their starting number of premium subscribers, they jack the price up to $10 and then hop on the same train as everyone else.

For the future of the music business, Amazon’s jump onto the streaming bandwagon was foretold in the prophecies, so I’m not really surprised. Again, just keep watching and waiting because more are coming. Amazon, given that this company is rational, should be expecting some losses in the near future unless they decide to raise their prices or some kind of divine intervention takes place. But Amazon may be onto something and is only using streaming as a springboard. Who’s to say?

Me. That’s why you’re reading this blog, isn’t it?

If you would like to check out the article that prompted this post, click here.

Once again, this has been the view from 214.

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