Amazon in Talks to Begin Streaming Music

What's This?

Amazon has reportedly contacted music labels about striking deals to stream music. Amazon.com employees, pictured, go back to work after a short break at an Amazon.com Fulfillment Center on "Cyber Monday" on the busiest online shopping day of the holiday season Monday, Dec. 2, 2013, in Phoenix.

Image: Ross D. Franklin/Associated Press

By Jason Abbruzzese2014-02-28 09:39:30 +0900

Feel the rhythm, feel the rhyme: streaming music might be coming to Amazon Prime.

Amazon is in talks with various music labels that could let it stream music to customers, just like Spotify. That's according to a report from Peter Kafka at Re/code .

See also: 8 Features We Wish Amazon Prime Had

A streaming music service would bring Amazon into an industry that has grown crowded and already suffers from low margins. However, low margins are nothing new to Amazon — and streaming music would be a major addition to the entertainment offerings lined up for Prime subscribers.

Amazon Prime currently offers two-day shipping for $79 a year, a service that pays for itself quickly for people who tend to order from the site often. Prime users also get an increasing selection of movie and television streaming from Amazon's library. While not quite competitive with Netflix, the media package highlights the fact that Amazon sees Prime as more than just shipping.

Music streaming is a low-margin business. A streamed song generates far less profits than a CD sale or even the purchase of a song online. The space is crowded with Pandora, Spotify, Google Play, iHeartRadio, Beats Music, Rdio, Grooveshark and many others.

Therein lies the advantage for Amazon. It does not need to necessarily turn a profit from its music streaming. Just by including it with Amazon Prime — which may soon be significantly more expensive — the company can make the product more valuable for customers.

Apple ran a similar gambit when it launched its iTunes store. The company has never made a ton of money from its music sales. It did not need to. Offering music downloads encouraged sales of iPods, a product that have some very attractive margins.

See also: Apple's Business Model Is Backwards — And It Works Like Crazy

Music streaming, therefore, could become for Amazon what music downloads were for Apple — a way to drive more people to spend money on the core business. And as Time pointed out almost a year ago, people on Prime tend to buy way more stuff off Amazon.

Amazon declined to comment for this story.

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Topics: amazon, amazon prime, Business, Sports, streaming music