Here's why Amazon's new music ambitions should scare Apple and Spotify

Here's why Amazon's new music ambitions should scare Apple and Spotify

By Nathan McAlone

Amazon is readying its own separate music service to compete with Apple Music and Spotify, and “will release more details in the coming weeks,” according to Bloomberg, which cites a person with knowledge of the matter.

The streaming plan will reportedly cost around $5 per month and Bloomberg says Amazon will “probably lose money on the monthly fee.”

That should scare competitors like Apple, Spotify, and Pandora. Why? Because it suggests Amazon is prepared to lose a big chunk of money on the service if that means making Amazon’s Echo speaker family and its Alexa digital assistant part of your everyday life.

Let’s say Amazon loses $5 per person, per month, on the service. That’s a lot of money, but it would still probably be worth it, according to Greg Portell, an analyst at consulting firm A.T. Kearney. “Amazon’s currency is engaged users, not subscribers to a music streaming service,” he told Bloomberg. “If music helps them get you on their platform, the benefits for Amazon far exceed $5 a month.”

We don’t yet know what the full feature set for Amazon’s music service will be, and it could end up having a lot more limitations than the all-you-can-eat buffet of Spotify or Apple Music. An earlier report from Recode’s Peter Kafka said this cheaper plan will only work with Amazon’s Echo player, citing industry sources.

But if Amazon can afford to lose $5 per person, it potentially could put out a product that could compete with Spotify and Apple, and put them in a tough position. Spotify lost $194 million last year, and is reportedly looking to IPO in the second half of 2017. It’s hard to make money selling subscriptions to music streaming services, especially if Amazon doesn’t have to, and is trying to poach your customers.

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