Amazon in Talks to Launch Ad-Supported Music Offering: Exclusive

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Amazon logo.

"Alexa, play free music."

Amazon has entered into discussions to launch a free, ad-supported music service, sources familiar with the plan tell Billboard -- intensifying its competitive threat to global streaming leader Spotify.

The world’s biggest e-retailer would market the free music service through its voice-activated Echo speakers, sources say, and would offer a limited catalog. It could become available as early as next week.

To obtain licenses for the free music, Amazon has offered to initially pay some record labels per stream, regardless of how much advertising Amazon sells.

Amazon declined to comment. 

The move underscores Amazon’s growing power in the music market, as a distributor that can afford to discount music as a loss-leader to support its core retail business. That’s a luxury Spotify doesn’t have, as its shareholders pressure the music-focused public company to turn a profit.

Until now, Amazon has offered its limited Prime Music service as a way to drive Prime subscriptions, which cost $119 a year for perks like free delivery. It also sells Amazon Music Unlimited subscriptions separately for $9.99 a month, reducing the fee to $7.99 for Prime members and $3.99 a month for people who only listen on an Echo device.

Currently, Spotify is the only major subscription-dependent music streaming service with a free tier -- a generous offering that’s been key to it hooking and funneling in new paying subscribers. (While YouTube has also long been free around the world, the ad-driven Alphabet video platform is less interested in converting its free users into paid customers.) The free service offered by Spotify, which currently counts 96 million paying subscribers and 116 million free users, is attractive because it lets listeners hear particular albums or artists on demand, though free users can’t control the order of the songs.

Apple Music, by comparison, has 56 million paying subscribers without a similar free funnel. (Apple’s Beats 1 radio is free, but doesn’t include on-demand listening).

Amazon hasn’t disclosed how many paying music subscribers it has, but some reports last year estimated it counts over 20 million subscribers across its offerings and expect it to gain steadily thanks to integration with its market-leading smart speakers.