Amazon launched a streaming-music service called Prime Music, making the gamble that adding on-demand tunes to its $99-a-year Prime service will be more important in drawing new members than matching the exhaustive catalog offered by rivals Spotify and Apple's to-be-acquired Beats Music.
Prime Music goes live Thursday with more than 1 million tracks pulled from the catalogs of two of the top three record labels -- Warner Music Group and Sony Music -- as well as from large independent labels. Universal, the world's biggest recorded music company, is absent.
By comparison, Spotify, the leader in subscription streaming music with 10 million paying members, and Beats Music, which Apple agreed to buy last month for $3 billion, have catalogs with more than 20 million tracks.
"A lot of these services have more music than people will ever listen to," Steve Boom, Amazon's vice president of worldwide digital music, said in an interview. "People are paying for a lot of music they're never going to listen to."
The Seattle-based e-commerce company is the latest tech giant to turn on a subscription streaming-music service. In the past few years, services offering all-you-can-eat music for a monthly fee have become recorded music's brightest spot of revenue growth. Revenue from subscription and streaming services rose 51 percent to top $1 billion for the first time last year, according to the International Federation of the Phonographic Industry. Those sales countered a slide in physical sales (think CDs) and a slight decline in digital music download revenue.
But the nascent model has yet to prove it can be profitable --, even as Spotify's revenue has grown, so too have its losses.
Amazon's unique take, bundling music as part of its Prime service, underscores how companies are still trying to figure out a business model that works. The Prime program, which has tens of millions of members, already offers two-day shipping on select Amazon purchases, a Netflix-like streaming video service, and a lending library of e-books for Kindle devices, the Amazon family of tablets and e-reader.
The number of songs in a catalog is a "red herring," Boom said. Amazon's music download store has almost 30 million tracks, and a "substantial" portion are never downloaded, he said.
And,, Prime Music won't always get tracks as soon as they are available. Amazon said its deals bring some songs on board right after they're released, but others will be delayed, a tactic known as "windowing." None of its deals with music providers have delays longer than six months, the company said.
The trade-off in agreeing to such windows is that Amazon lowers the cost of licensing.
Given the limitations of its music offerings, Amazon is unlikely to attract new Prime members solely by the virtues of its music-streaming product. Amazon's advantage, however, is the package including both music and video -- plus shipping and e-books -- for a lower yearly price than the sum of the parts elsewhere. The Beats service and Spotify each charge subscribers $10 a month; Beats also charges $99 for an annual membership, the same price as more diverse Prime. Netflix charges about $8 a month and is rolling out a price increase to $9.
Prime Music makes Amazon one of the rare companies offering both music downloads (songs that you can buy) and subscriptions. Most subscriptions services like Beats Music and Spotify focus on streaming the songs for a set fee, though Spotify and Pandora each offer a free, ad-supported streaming service.
With Prime Music, Amazon joins Google in offering both options to a huge base of customers, as Google's Play store sells downloads and also offers an All Access subscription option for $10. Google executives have said that subscription has helped its store, rather than hurt it.
Apple, which defined the music downloads market with its iTunes store in 2003, had for years dismissed the subscription model, based on the presumption that consumers didn't want it and that an all-you-can-eat buffet of tunes would keep customers from paying for songs. That will change when Apple closes its deal for headphone maker Beats, which is expected later this year.
Prime Music, which is ad-free, will be available as an automatic over-the-air update to Kindle Fire HD and HDX devices. It is available online at primemusic.com, and through the latest Amazon Music app for iOS, Apple's mobile operating system, and Android, the mobile operating system from Google that runs the majority of the world's smartphones. Amazon also has desktop clients for Windows and Mac computers.
The service allows people to pick specific tracks to add to a library, which can also be populated by music the member has purchased either through Amazon or a rival download store if they're in an Amazon Cloud Player, a storage locker for music. Adding a song or album to a library will trigger a song recommendation carousel familiar to anyone who has shopped on Amazon before: "Customers who bought this album also bought..."
Prime Music also has hundreds of playlists compiled by experts that Amazon drew from music publications, labels, radio stations, and musicians themselves. The playlists are based on artists such as "Pink's Top Songs," genres such as "50 Great R&B Slow Jams," mood such as "Pop to Make You Feel Better," or activity such as "Rock for Runners."
Amazon's service also allows off-line caching of music, so users can listen without being connected to a network. Playlists are designed to have about 20 to 50 tracks, so they won't hog storage space on phones or kill a mobile device's data limit. On Kindle Fire HD and HDX devices, lyrics to songs will automatically scroll when a song is playing.
Much like Prime Instant Video, Prime Music will offer buttons to buy music that isn't available as part of the subscription. But, at least initially, commerce integration with the broader Amazon store stops there. For example, adding a SpongeBob SquarePants song to your library won't prompt you to buy a SpongeBob backpack.
Even without that, Prime Music -- like every Amazon move -- is ultimately aimed at ushering users back into its store. Analysts say that Prime customers buy more than regular shoppers. Now they can shop while listening to some of their favorite tunes. It would make a perfect Prime Music playlist: "Music for 1-Click Ordering."