With Echo’s AI, Amazon makes a big splash into the music streaming service

Where Pandora and Spotify have failed, Amazon hope to make it big armed with Prime memberships and its interactive AI-backed speaker – Echo.

On Wednesday Amazon.com Inc. has launched a full-fledged music streaming service with a subscription rate of just $3.99 a month for owners of its Echo speaker. This move shows signs of accelerating industry trends towards a more flexible price range after years of subscription rates hovering at $9.99 a month.

Its new music streaming service is called “Amazon Music Unlimited”. It provides users access to a huge repository of songs, similar to Apple Music and Spotify.

While subscription to play music on the Echo costs just $3.99 a month however access to music beyond this device will set you back by $7.99 a month if you have Prime membership. Amazon Prime members receive a free video service in their package as well. Non-Amazon Prime members will have to pay $9.99 a month.

With this move, Amazon is banking on Echo to have a bigger impact in the streaming industry. Released in 2015, Amazon’s Echo has become a surprise hit with music being central to the device’s appeal.

The fact that the speaker provides a level of interactivity is a huge bonus as well. Amazon has built an elaborate system for voice controls for listening into the Echo.

As per Steve Boom, VP of Amazon Music, such smart home devices will be key growth factors for the music industry.

“The first phase of growth (in music streaming) was driven almost entirely by smartphones,” said Boom in an interview. “We believe pretty strongly that the next phase of growth in streaming is going to come from the home.”

With Amazon choosing to place the Echo’s price point considerably lower than the competition, it clearly plans on undercutting its competitors.

In the past music label executives have been reluctant to budge on prices, but with the music streaming industry gaining a bigger pie of music sales, they have come under increased pressure.

Boom is optimistic that the lowering of subscription prices will expand the music market.

“We’re moving music away from a one-size-fits-all approach,” said Boom. “We are the ones who have been pushing this the hardest.”

With the music industry adopting a business model wherein streaming services are forced to pay the majority of their revenues to rights holders, Spotify and Pandora are barely managing to turn a profit. According to analysts, Amazon can absorb an increased expense which could be offset by a boost in its Prime membership.

As per Jan Dawson, an analyst at Jackdaw Research, Amazon’s premium music service which includes standalone video services as well, will offer only basic media options. Consumers who want more will have to pay to get additional content.

“It’s just making Prime that much stickier,” said Dawson.

Amazon is also hoping that the artificial intelligence that is built into the Echo will keep things interesting and going for users. With recommendation based on the listener’s habits become mainstream, Amazon has woven AI functionalities into the system such that users can request songs based on a particular mood or one that fits with particular lyrics.

Kintan Brahmbhatt, Amazon Music’s director explained, data from the Echo has taught Amazon much about the language of music.

“You can ask for Michael Jackson by saying, ‘Play music by the King of Pop. It’s smart enough to know that’s what you meant,” said Brahmbhatt.

Categories: Creativity, Entrepreneurship, HR & Organization, Strategy


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