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Amazon starts streaming music negotiations with very low offer

By | Published on Tuesday 11 March 2014


As expected, Amazon has started its price negotiations with the labels very low indeed as the market leading etailer seeks to enter the streaming music market. As previously reported, having rolled its video-on-demand service in with its Amazon Prime scheme, it’s thought the retail firm now wants to add streaming music to that initiative too.

However, it seems unlikely Amazon will want to charge customers much more than ten dollars a month for Amazon Prime membership, and that would have to cover music and video content, plus the other benefits Prime members receive (mainly free next-day delivery). Which means that, even if Amazon had low expectations for its own profit margin on that deal, there would still be a lot less money available for labels and music publishers than is guaranteed by Spotify et al, who charge the same rate to consumers for just music.

And, of course, the fear at the labels is that if they offer Amazon too favourable terms for a Prime streaming service, it could screw over Spotify, Deezer, Rdio and Beats just as they are all trying to go mass-market, and therefore negatively impact on the monies those services are paying into the music rights companies.

According to label sources who have spoken to US trade magazine Billboard, Amazon is not currently looking to replicate a Spotify-type service in its entirety, in that it is looking to licence portions of each label’s catalogue rather than pretty much everything the record companies have so far digitised.

And when picking what to licence, the etailer’s focus would be on catalogue rather than new releases. Therefore, Amazon might argue, its ‘lite’ streaming service wouldn’t necessarily compete head-on with the Spotifys of this world. Except that, when it comes to engaging mass-market, the music-only streaming services may also look to offer cheaper limited catalogue options down the line.

In terms of rights holder payments, Amazon’s current offer is reportedly a fixed annual figure set aside for all the music rights owners, which would then be distributed to labels and publishers based on how much their content is accessed over the year. But the total amount paid out would be a fraction of that paid into the music rights industry by just Spotify, with the indies reportedly being offered just $5 million between them. It would also mean that if the upgraded Amazon Prime service was a massive success, it would be Amazon who enjoyed the kickback, not the company’s content partners, whose income would be fixed.

Of course Amazon is a powerful player in music through its mail-order operation and, to a lesser extent, its MP3 store, and will presumably be looking wield some of this power in its negotiations on streaming.

Though the retail giant probably isn’t as powerful in the digital music space as it is in the e-book domain, it not controlling the market-leader content consumption devices (yet), and you sense that the initial reaction from the labels to Amazon’s Prime proposition is “you need us more than we need you, so why the hell would we sign up on these terms?”

Indeed, some in the labels seem outright offended by Amazon’s offer and are pretty adamant a deal is not going to happen, though others say the current proposal is an opening gambit and there is still plenty of room for negotiation. All of which means, as we expected, streaming music could as yet very much arrive on the Amazon platform, but it is unlikely to happen imminently.