Amazon Launches Prime Music Streaming Service

When Amazon launched its Amazon Prime music subscription service this morning, it immediately became one of the largest paid interactive music services in the U.S., if you're measuring by subscriber base.

While Amazon hasn't admitted how many subscribers its Amazon Prime service has, in January of this year one company executive publicly said it has millions of subscribers in the U.S. and tens of millions globally.

Amazon Prime was initially started as a way to increase Amazon customer loyalty. The gigantic internet retailer initially charged a $50 annual membership fee for free two-day shipping on all orders. Over the years, it added a movie and TV viewing service that today holds 40,000 titles, as well as a library with over 500,000 books.

When it began planning an increase in its annual membership fee to $99 in from $79, it wanted to add features to justify the increase, and a music subscription service was seen as just the ticket, according to industry sources.

For its part, Amazon vp of digital Steve Boom says that music was a fine complement to the rest of the Prime service. "Wouldn't it be great if we could have a music benefit in prime?" Boom said. "Our Prime members are getting their wish... access to a large catalog of music."

At launch, the service will offer over 1 million songs from tens of thousands of artists, Boom said. Moreover, the tracks in the service can be mixed with each subscriber's own personal collection.

Amazon took an unusal approach to its service; it told most labels it only wanted catalog titles. Indie label executives said that once music has been out for six months, those titles would be offered in the service.

The service makes those titles available as tethered -- or conditional downloads -- or as streams, the subscribers choice. (A tethered download disappears from the subscribers device once they end their subscription.)

The service comes with a variety of features, including the ability to stream or download music. For the latter, subscribers can complete albums from which they own a song or two via tethered downloads. Listeners also have the ability to actually purchase music, as the service also features buy buttons next to the music.

In fact, the music service was also pitched to labels as a way to potentially increase sales, label sources said. According to Boom, the Amazon movie and TV service has increased sales of DVDs and the merchant is hoping the same will happen for music. But some music executives are skeptical that will occur based on iTunes Radio service's inability to impact music sales at the iTunes stores.

Boom says Amazon hopes that the service increases sales, but in any event Amazon had to offer an interactive streaming service because that's the way the market is moving. He notes that Amazon's download sales are down, but not as much as the U.S. market's decline of 12.3% for track download and 12.1% for digital album downloads so far this year when compared with last year.

Other features include no advertising during playback and, where possible, songs being synched along with lyrics during playback, through a deal with LyricFind. The service also offers the option of building playlists. In addition to its interactive features, the service has made an effort at human curation, building hundreds of playlists based on genre, artist, mood or activity, compiled by a team of music editors.

While you won't find most albums a part of the service at launch, you could eventually see Hot 100 songs available for playback, since songs take a while to climb that chart. Moreover, some albums may well be available on their street dates, because some labels say they may well allow new music to be put up immediately. For streaming, sound quality will be adjusted to connectivity, which will range from a high bit rate of 256K to a low of 48K, according to Boom.

But that's all on the front-end. Behind the scenes, the Amazon business model for its service is considered controversial. Initially, it told the majors, it would only pay them their pro-rated share of a $25 million pool, while it told the indies that it would only pay them their pro-rated share of a $5 million pool; and further there would be no per-play rate paid, regardless of how many subscribers or plays the service generates. In other words, payments would be capped.