Following the launch of Beats Music earlier this year, Amazon announced the launch of its music streaming service - Prime Music - last Thursday, with a high hope to share a slice of the global digital music market, valued to be worth more than US$ 1 billion.
The Amazon's service is available in the US only at the moment, it is free for all Amazon Prime users, a US$ 99 - annual subscription bundle that provides next-day delivery service, TV & films streaming, 'lending library' of e-books.
However, without the licensing right of Universal Music Group, which owns 38% share of the market with artists like Katy Perry, Taylor Swift, Lady Gaga, Kanye and Jay-Z, Amazon is left with a library of only 1 million songs, and for sure it will struggle to compete with its giant rivals such as Spotify, Deezer, Rido, each of which has 20 million + songs in music libraries.
According to IFPI Digital Music Report, there are more than 450 digital music streaming providers around the world since Pandora was launched in 2000, the music streaming market is growing rapidly by 51% in 2013, exceeding USD 1bn for the first time. There are now over 60% of internet users are using licensed music streaming platform.
Although the figures all sound positive, in fact, it's reported that none of the music streaming service providers has successfully turned it into a profitable one because they haven't been able to monetise the market - advertising is only accounted for 8% of total digital music revenue, labels are squeezing roughly 70% of royalties from streaming services e.g. Spotify paid out a total of more than USD 1bn to rights holders. Hence, if we put the figures in perspective, you will realise the music streaming business is still far less lucrative for record companies than digital downloads as it is only accounted for a tiny part of the entire industry's USD 15bn revenue.
Has Amazon entered a business that's mere for music streaming but not money flowing after all?