Amazon launched an on-demand music streaming service called "Amazon Music Unlimited," charging $7.99 per month for Prime members and $9.99 per month for non-Prime members.
It's clear that Amazon wants to differentiate its service on price, as the Prime-member tier is cheaper than competitors like Apple Music and Spotify, which charge $9.99. Amazon also offers a plan for $3.99 per month that limits listening to one Echo device or an Amazon Tap.
The launch represents a continuation of Amazon's strategy to extract more value from existing Prime members, improve the value proposition of Prime to entice nonmembers, and drive sales of Echo devices.
Existing prime members will expand their music library exponentially if they subscribe. The new service will expand the content library to "tens of millions" of songs, up from roughly 2 million songs, and will now be comparable in size to Apple Music and Spotify, according to Time. This could signify that Amazon is planning to offer more premium tiers that Prime members could upgrade to for access to more content and services.
Amazon has added three new free perks for Prime members in the past two months. These include access to more free books and magazines through Prime Reading, podcasts and audiobooks through Audible Channels, and games and videos via Twitch, a social/video platform for gamers. Amazon also plans to triple the amount of original video content by the end of this year.
As adoption of Amazon Echo devices continues to grow, demand for audio ads will likely increase, as these devices are well suited to music listening. In fact,advertisers plan to double digital audio budgets in the next two years, according to a recent survey conducted by Ad Age and the Trade Desk. Currently, only 7.5% of media budgets are dedicated to the digital audio format, but marketers think this allocation will reach 14.8% by 2018.
Pandora launched a new premium tier on the same day, but still lacks an on-demand option. Pandora Plus is the reinvention of the company's existing ad-free subscription service, Pandora One, and is priced the same at $4.99 per month. New features include unlimited skips and an offline listening mode. However, of the largest music streaming services, Pandora is the only one that does not have an on-demand feature, a major feature omission that could limit adoption. Of Pandora's 78 million monthly listeners only 5%, or about 4 million, subscribed to Pandora One as of Q2 2016.