Re/code reports that Amazon may be about to do something Apple tried hard to do but wasn’t able: launch a true streaming music service for $5/month (Apple was able to secure the $5/month pricing for students). There is, though, rather a big catch for Amazon: the service will only work on the company’s own Amazon Echo speaker.
Apple worked hard from the start to try to reduce the monthly cost of what was then Beats Music, and was said to have specifically targeted a $5/month subscription as that matched the average spend of its best iTunes customers. Apple needed the agreement of music labels because the licensing model is one where labels get the bulk of the monthly fee, streaming services effectively taking a commission from the fee charged to consumers.
When music labels refused, Apple tried for $7.99, but wasn’t able to agree this either. When it finally launched, Apple Music charged the same $9.99/month as competing services, a three-month free trial the only concession it was able to win.
One of the reasons labels fought so hard to retain the standard $9.99/month pricing was licensing terms dictated that any concession offered to Apple would have to be offered to other services too. This was the basis on which Apple was able to offer its only $5/mo deal – the same half-price student subscription offered by Spotify. Which makes this report all the more curious.
It may be that labels view an Echo-specific service as such a niche market that it isn’t worth worrying about.
Amazon’s discount service would be different, industry sources say, because it would work like Spotify or Apple Music — unlimited, ad-free music on demand — but it would be constrained to Amazon’s Echo player, and wouldn’t work on phones. That runs counter to conventional wisdom in the music business, which believes that most people value the ability to take their music with them and play it whenever they want.
The piece does note that it’s not a done deal – though the sticking point is said to be only over whether Amazon can charge $4 or $5 per month. It will be interesting to see whether the deal is actually done.