Report: Amazon eying music service, could be free for Prime subs


Re/code reports Amazon (AMZN) is "engaged in more serious talks with big music labels" about launching a music streaming service that might be bundled with Prime.

However, one source adds a deal isn't close to be finished, since studios are balking at Amazon's request for a major price discount relative to existing services.

Amazon, no stranger to the realm of online music, has already said it's mulling a $20-$40/year U.S. Prime subscription hike, a move that could make it easier to subsidize a music service. Moreover, the e-commerce giant recently hiked Prime fees for U.K./German subs, while simultaneously bundling Lovefilm's video streaming service.

The launch of an ad-free Amazon music service that's bundled with Prime would have big implications for market leader Spotify (possibly prepping for an IPO), and could also affect streaming radio leader Pandora (P).

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Comments (27)
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    Pandora is more like a charity foundation. Institutions donate their money and Pandora execs get paid with options. Pandora hasn't made money over 10 years and their growth is now stagnant on a matured ad business that is going nowhere.

     

    Competition keeps rising with an already crowded mobile ad market. It seems the only companies that will survive is the one with deep pockets, unfortunately as soon as hedge funds bail on Pandora pump, this company is finished.
    27 Feb 2014, 05:46 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    All the while playing ads for DIRECT COMPETITORS like Audible; fantastic strategy...
    27 Feb 2014, 06:14 PM Reply Like
  • Gary J
    , contributor
    Comments (10603) | Send Message
     
    Well you already get some nice video with Prime so might as well add some audio!
    27 Feb 2014, 05:53 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    When AMZN launched their NFLX clone people were making posts similar to @manic's "this company is finished...only deep pockets survive...AMZN will run at a loss to crush NFLX, they don't care about profits, just ecosystem...etc etc", in the year and a half since the launch of AMZN's movie streaming "Netflix killer", NFLX is up +700% and counting.
    27 Feb 2014, 06:42 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    Original content is the only reason Netflix survived. I would have cancelled my subscription long time ago if not for the House of Cards. Pandora, on the other hand, has less content that any of its competitors, and no original content whatsoever.

     

    A free no-ads Amazon service will take a much larger bite out of Pandora's market share than an ad-supported iTunes Radio.
    27 Feb 2014, 06:51 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    From the article, it looks like a Spotify competitor (on-demand/lean forward), rather than Pandora (personalized radio/lean back).

     

    And you discount too highly P's first mover advantage. Case in point from their NFLX clone, AMZN's movie service now accounts for 1.6% of downstream compared with NFLX at 32% (20x the movie streaming of AMZN), this will be the case with music as well.
    http://bit.ly/HRXcQg
    27 Feb 2014, 06:54 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    Pandora cannot afford to lose 5% of its users to iTunes, another 5% to Beats, yet another 5% to Amazon, and a little bit to Spotify, Songza and MixRadio, and later 10% to YouTube, and later something to Deezer, and so on. Whether it's a sudden death or a death by 100 cuts, it does not make much of a difference.

     

    Spotify has the same features as Pandora now, by the way.
    27 Feb 2014, 07:03 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    <<Pandora cannot afford to lose 5% of its...>>
    Sure they can, look at NFLX, competition from YouTube, Hulu, Amazon, HBO Go, Crackle (Sony), VUDU (Walmart), iTunes, Redbox/VZ, many of those with their own exclusive content. Btw, I disagree that original content is "the only reason NFLX survived", the only quality show is House of Cards and only a small percentage of Netflix subscribers have even watched it. And name a company in the world that doesn't have competition? This is not winner take all, and it never is. But one last thing to gnaw on, I'd rank P's genome/playlists maker/massive thumbs data as akin to "original content" for radio, because insincere song selection will never keep an audience, thus P's staggering lead and why iTR, Beats and Spotify are having trouble slowing them down.
    27 Feb 2014, 07:47 PM Reply Like
  • flux8
    , contributor
    Comments (721) | Send Message
     
    Netflix offers a model that no one else including Amazon offers. There is content (other than the original content) that cannot be seen anywhere else other than Netflix without paying extra for it.

     

    The same is *not* true of Pandora. Anything that Pandora offers can be heard anywhere else, plus a lot more. They don't offer superior audio quality, superior selection, or superior interface. Not sure what you're seeing there.

     

    Netflix had one legitimate competitor - Amazon. Pandora has over a dozen legitimate competitors that include Google, Microsoft, and Apple.

     

    I wonder how long it will be before Netflix starts offering music or music videos...
    27 Feb 2014, 07:57 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    <<They don't offer superior audio quality, superior selection, or superior interface.>>
    I'd argue every one of these coments is false, P has the best audio quality relative to required bandwidth (they use AAC+ encoding, most others are almost double the bandwidth with only slight improvement in audio, and you certainly have the option of bumping P's audio quality up), superior selection by far, have yet to create a station on iTR, iHeart, or Spotify that I enjoy listening to, and Beats doesn't even allow you to create a station, and P's interface is so simple that this alone largely explains its ubiquity, anyone from young to old can use it, those dial-in your hits/variety level (Rdio, iTR have this) would be great if the song list wasn't completely random to begin with! Beats is a mess, find an OK playlist, then it ends, go searching for another. Weak.
    27 Feb 2014, 08:08 PM Reply Like
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    The brilliance of Amazon Prime service its slowly becoming a multi-service all in one package.

     

    Free/fast shipping, free streaming movies/TV, free music, free reading for a minor subscription price.

     

    Pandora freeloaders might flock in mass to Amazon since it's quickly becoming "best bang for your buck" deal. And I wouldn't be surprised if Apple, Google and Microsoft take the same road in the near future.

     

    Why sign up to Netflix for 8$ or crappy Pandora radio sub when you can listen to all the music you want and free movies, get all your Amazon purchased same day and read all the books you want.

     

    The only reason I find people might stay with Netflix is because of their exclusive partnerships and original content but unfortunately for you dgulick Pandora doesn't even have that moat.

     

    So yes Netflix will survive, but not Pandora since its service has nothing exclusive to keep people from switching. Not to mention, Pandora has the smallest library of licensed music vs all other competitors. Why pay for individual services when you can get all and more ad free for 1 small price.

     

    I have no position in Amazon but I like the strategy.
    28 Feb 2014, 12:48 AM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    "Free/fast shipping, free streaming movies/TV, free music, free reading for a minor subscription price."

     

    Already get movie/TV streaming for $8/month, and can get free music from many places; we're back to free shipping - only the price will likely jump 25-50% in the near future ($20 - $40)...
    28 Feb 2014, 06:54 AM Reply Like
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    It's matter of convenience not where i can get stuff for free. If we going to go down that road, then you can just go pirate all the media you want from torrent sites.
    28 Feb 2014, 10:22 AM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    "It's matter of convenience not where i can get stuff for free. If we going to go down that road, then you can just go pirate all the media you want from torrent sites."

     

    There's a fine line between paying, free (legal), and illegally stealing music, movies, etc. A consumer can listen to music for free on Pandora, Spotify, Xbox Music, and Grooveshark (the list goes on and on), legally. Consumers using those options are not breaking the law, do not need to learn the process for downloading music / movies (which is likely too difficult for many consumers), are avoiding the potential risk of downloading a virus, etc.

     

    Maybe you are willing to pay for music when you can get it for free just as easily - but if the additions are of little / no value to consumers, lots of people who are more value conscious than you seem to be will balk. Time will tell...
    28 Feb 2014, 10:41 AM Reply Like
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    Pandora not an on-demand service, so you can't listen to your specific songs. Topic is about Pandora, not everything else. Don't understand what you are arguing about.

     

    Someone who already subscribed to amazon prime will be happy to know they soon going to have on demand music access ad free.

     

    So those people who already have amazon prime and using alternative apps will simply switch to amazon prime music service, so that alone is 20 million subscribers. http://read.bi/1fwhG04

     

    Bad news for Pandora.
    28 Feb 2014, 11:20 AM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    "Pandora not an on-demand service, so you can't listen to your specific songs. Topic is about Pandora, not everything else. Don't understand what you are arguing about."

     

    Well this has expanded to a discussion of Amazon's Prime offering; it started when you made the following comment:

     

    "The brilliance of Amazon Prime service its slowly becoming a multi-service all in one package."

     

    My response is that the services being added - in this case, music - are not worth the price increases that will come with a Prime subscription (25-50% increase, by recent reports).

     

    Pandora may not offer that specific service; Xbox Music, Grooveshark, and others do. The point is quite simple - you suggest that Prime is the "best bang for your buck" as they add these features; I'm simply making the point that if you can get those services elsewhere - FOR FREE - then the value of the offering has actually worsened as the cost increases.
    28 Feb 2014, 11:45 AM Reply Like
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    You can't speculate that cost will increase we have nothing official yet, nor can you assume that current amazon subscribers decline or increase as a result of new service or price hike.

     

    All we know right now is amazon prime subs keep going up and more services they add, better the value and convenience for customers.

     

    What amazon trying to do is give you an entire ecosystem for 1 price instead of pricing each service and fragmenting user base like big tech competitors currently do. I have feeling this is the future and other big tech competitors will follow.

     

    As for Pandora, its doomed no matter listeners switch to amazon prime or whatever other alternative app you listed. Too much competition in music services with high costs the only ones that will survive are the companies with deep pockets and large sphere of influence.

     

    Like I said, I have no position in Amazon because of its ridiculous valuation on PPS.
    28 Feb 2014, 11:55 AM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    That's fair - without a price increase, the value is at least unchanged (and I agree with you that there's some incremental value of the entire ecosystem / all services in one place, even with free alternatives elsewhere).

     

    And I'm certainly not here to defend Pandora. As far as I can tell from listening to Pandora, they play more ads for Audible than anybody else; why you would allow advertisements for a direct competitor looking to take "listening share" is quite peculiar in my opinion...
    28 Feb 2014, 12:13 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    Audible is audiobooks, not really a competitor.

     

    As for AMZN, their video service is ok, but not as good as NFLX. I expect their music offering to be the same thing, i.e., ok, but not as good as P.
    28 Feb 2014, 01:17 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1215) | Send Message
     
    "Audible is audiobooks, not really a competitor."

     

    Well they both compete for my listening time - and I can't listen to both simultaneously.

     

    It's much like Red Bull & Monster - they might not compete directly with Sprite and Mt Dew, but KO & PEP have undoubtedly lost consumers of those products to their competitors. It's not just their respective share of the soft drink category that investors need to consider - it's share of stomach as well. As has been widely reported in the US, that share is falling and is creating growth issues for both KO & PEP - with energy drinks being one variable that's causing the problem.
    28 Feb 2014, 01:34 PM Reply Like
  • manicdvln
    , contributor
    Comments (1514) | Send Message
     
    Not as good? Show me this crystal ball you have.

     

    On Demand ad free music service seems pretty good deal to me since I am already getting movie/tv, reading and free fast shipping one 1 time subscription. All those moms and pops and kids with Kindles going to love this.

     

    What is Pandora offering me? Same old songs mixes rehashed over and over with bunch of crappy political ads with no way of downloading or saving songs I like on already tiny library of songs. How is this better again?

     

    Keep dreaming...
    28 Feb 2014, 03:58 PM Reply Like
  • dgulick
    , contributor
    Comments (2266) | Send Message
     
    <<Not as good? Show me this crystal ball you have.>>
    I was referring to NFLX vs. AMZN movie streaming, this is not the *future* I'm looking at, it's the *past*, the fact that it is not as good is reflected in their respective market share of movie streaming (20:1).
    <<All those moms and pops and kids with Kindles going to love this.>>
    A drop in the bucket compared with the devices used to stream P (iPhone/iPad, Droid phone/tablet, Windows Phone/surface, Sonos, Roku, Google Chrome, Xbox, native car stereos, etc etc INCLUDING Kindles)
    <<no way of downloading or saving songs>>
    Royalty licensing costs triple for this feature, and costs are passed on to the user (a P subscription is $3/month, on-demand services Beats, Spotify, Google All-access are $10/month). You keep making this argument without consideration of the cost difference, there will be a market for both, but P's opportunity is bigger.
    << Keep dreaming...>>
    Lol, the one dreaming here is you, dreaming that somehow your inane posts are going to save your short! Sorry, you bet against some folks that are truly innovating the future of music consumption. Cover now, before it gets worse.
    1 Mar 2014, 10:21 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11169) | Send Message
     
    Why be profitable when you can just start yet another non-core business line?

     

    Forward PE: 85.14

     

    Price to Book: 16.95

     

    Profit Margin: 0.37% (!)

     

    Diluted EPS: 59¢

     

    Enterprise Value/EBITDA (Past 12 mo.): 43.12

     

    Its gonna be ugly when this bullet train runs out of track!
    27 Feb 2014, 07:44 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    And both EPS and profit margin on your list are on non-GAAP basis. On a GAAP basis they are losing money.
    27 Feb 2014, 09:10 PM Reply Like
  • dealraker
    , contributor
    Comments (903) | Send Message
     
    So Amazon goes around that strips the profit from one business sector after another and its stock price soars upwards forever. Don't we call this socialism? Business with no profits?
    28 Feb 2014, 05:25 AM Reply Like
  • Gary J
    , contributor
    Comments (10603) | Send Message
     
    You might. You might also call it growth and investment.
    28 Feb 2014, 06:39 AM Reply Like
  • fayrweather
    , contributor
    Comments (163) | Send Message
     
    So... how do we invest in Grooveshark?
    27 Mar 2014, 12:42 PM Reply Like
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