With new music streaming service, Amazon is trying to lure customers to its Echo home gadgets
Amazon.com Inc.’s new streaming music service isn’t just the firm’s latest foray into digital media. It could also be a way to boost sales of the e-commerce giant’s voice-activated assistant devices and help them become essential appliances in customers’ homes, analysts say.
Amazon Music Unlimited, a subscription streaming hub with tens of millions of songs announced Wednesday, is available to any Amazon customer. But those who own Amazon Echo gadgets — household devices that serve as a speaker and double as an artificially intelligent home aide called Alexa — pay less, just $3.99 a month compared with $7.99 for Prime subscribers and $9.99 for others.
Music was already one of the “top activities” on Echo devices, said Ryan Redington, director of Amazon Music. But they can “provide a lot more than just music,” he said.
Echo and competing devices and services such as Apple’s Siri and Google’s Home are commonly used to answer questions, give updates on weather and control smart-home systems, such as thermostats.
Rolling in a new low-cost streaming music service might persuade more customers to take one home.
“For us, we see that the next frontier in growing the streaming music market is in the home,” said Redington. “We see voice as certainly an entry point into the home.”
But it’s e-commerce that is the ultimate goal, analysts said.
“Whatever can ultimately drive more profitable volume or traffic to their e-commerce business is really their grand approach,” said Josh Olson, technology analyst at Edward Jones
Customers who buy an Echo because of the discounted streaming of songs could easily be persuaded to start buying groceries via Alexa from Amazon Fresh or purchasing household items from Amazon.com by voice.
“The true value lies not only in streaming, not only in the Echo, but in the portfolio of all of the different services and all of the different hardware devices that Amazon is offering to the consumer,” said Werner Goertz, research director for personal technologies at Gartner.
A Gartner analysis this month predicted that consumer spending on virtual personal assistant devices like Echo could reach $2.1 billion by 2020, up from $360 million in 2015.
Market research firm Consumer Intelligence Research Partners estimated in April that Amazon has sold 3 million Echo devices since it was introduced in late 2014.
For now, Olson said Amazon’s streaming music service is likely more about expanding Amazon’s user base than driving large amounts of sales.
This is not Amazon’s first foray into the music scene. The e-commerce firm already offered Prime customers access to about 2 million songs.
But the company is betting that it can draw subscribers by tempting them with an Echo and having Amazon Music Unlimited communicate seamlessly with that device.
For example, rather than searching the millions of songs, users can ask Echo’s Alexa voice-control system to put on a playlist based on mood or genre. Through voice commands, it can recommend new songs, find and play tracks based on lyrics and respond to general commands such as “play music.”
Although the new streaming service was an “expected move,” it doesn’t really fit that well with Amazon’s broader music strategy, said Mark Mulligan, music analyst at Midia Research.
“Amazon has been a mass market, [a] mainstream music buyer’s destination,” he said. “What Amazon has got to try and do if it really wants to win over its super fans, you’ve got to persuade them to ditch services they’ve already spent many months, sometimes years of building playlists.”
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Though the new service puts Amazon in more direct competition with streaming firms such as Spotify and Pandora, Amazon is ultimately more concerned with dominating a connected home, analysts said.
“It’s an attractive potential market opportunity for a lot of these firms, so I think yes, Amazon is definitely interested in being one of the competitors there,” Olson said.
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This article was originally published at 3:50 a.m.
