Is Amazon Entering the Streaming Audio Business?

Yet again, more rumors about Amazon’s upcoming business plans have surfaced—this time surrounding the possibility of the company jumping into the already-crowded streaming music business. A post on Re/code cites “industry sources” who claim that Amazon is talking with music industry bigwigs about setting up a way to stream music to its customers. One thing is clear: if any company can dominate a field full of long-established rivals, it’s Amazon.

According to the post, one of the major stumbling blocks for Amazon’s efforts to close the deal with labels is that it’s looking for a bigger discount to stream the rights-holders’ music than the one that’s given to other music streaming services. If that’s true, the once powerful labels—who are already tired of earning less money every year off of a music industry that used to be almost purely profit—might not be interested in bending to Amazon’s will.

Whether or not this is true, Amazon jumping into music streaming does make a certain amount of sense. The company already streams video to Amazon Prime customers. Moreover, rumors are persistent that it’ll soon be releasing its own set-top box (which would bring the competition to Apple TV) that you can hook up to your TV that may or may not also play games. Adding streaming music to the mix is something of a no-brainer.

The news from last month that Amazon Prime may get a price hike complicates matters a bit, however. If Amazon Prime is too expensive to maintain under the current price structure, how does paying more money for the right to stream audio solve that problem? Furthermore, would users accept a $40 per year price increase for music streaming—especially if they already pay $10 a month for Spotify’s service? Mathematically, under that scenario an Amazon streaming service would still be a better deal than Spotify: it’d be $3 a month versus $10, or $40 versus $120 per year. But people don’t take kindly to price hikes, and may not enjoy being forced into a new service that they weren’t interested in. Undoubtedly, Amazon’s number-crunchers have the cost-benefit analysis of raising the price and the minimum discount they can get from music labels all figured out. But until we see it all laid out, we can only speculate.

Chances are that if the Amazon Set-Top box does materialize, and manages to do as well as its Kindle line of devices, music labels might change their tune (haha) about cutting a better deal with the retail giant. We’ll have to wait and see.

[Source: Re/code]