A little over three years ago Amazon launched Prime Instant Video, which allows Prime users to stream thousands of movies and TV shows. According to Amazon’s recent announcement, this has proved to be one of the “most important things” they’ve done for Prime members.

For those of you who haven’t heard, on Thursday, Amazon added a music streaming service to its list of benefits for Prime subscribers, called “Prime Music.” With Prime Music you can listen, ad-free, to over a million songs and hundreds of expert-programmed Prime Playlists. Prime Playlists are created based on your musical preferences and listening history. Similar to Spotify, you can download music to your phone or tablet for offline enjoyment. Kindle Fire HD/HDX devices will get Prime Music in an automatic update, and Android and iOS users can download the new Amazon Music app in their respective app stores.

Music streaming has been somewhat of a trend for companies lately, which became more apparent after Apple Inc. (AAPL) recently decided to purchase Beats Electronics. Amazon continues to expand its range of services, but is the music streaming market becoming somewhat crowded? This is a great development for current Prime subscribers, like myself, who will now get this service for free, but will it be enough to entice individuals to become Prime subscribers for $99 a year? Probably not.

An article in the Wall Street Journal quoted Amazon’s digital music vice president, Steve Boom, “You’re going to see a lot of songs from the Billboard 100, but you’re not going to see a lot of new releases. There’ll be something for everybody.” Spotify offers 20 million available tracks, and Pandora offers 1.5 million. Prime Music will offer approximately one million tracks, but will be without access to Universal artists, such as Maroon 5 and Eminem. The Wall Street Journal article continued on to say, “According to a person familiar with the matter, Universal is dissatisfied with the licensing prices Amazon has offered and is concerned that the service won’t get much traction unless it features newer releases. People familiar with the terms of Amazon’s contracts said the company wasn’t wiling to pay what some labels had sought for newer material.”

With such a basic and limited level of music capabilities, I don’t know if people will necessarily join Prime because of the music streaming benefit, however the move is a signal to investors that Amazon is putting its funds to good use and expanding into new markets. The question will now become whether Amazon is going to push further into this market or if it will simply have the semi-useful music streaming service as an added benefit for existing Prime members. Based on the Wall Street Journal article, it sounds like Amazon will have to cough up some more money if they want to attract customers by offering new releases and a wider variety of music. Amazon.com, Inc. (AMZN) closed down 2.77% on Thursday.

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Jaclyn McClellan

Jaclyn McClellan is an assistant financial analyst at AAII and is editor of Computerized Investing, the premiere publication covering the use of personal computers for financial planning, investment analysis and portfolio management. She contributes articles and reviews to Computerized Investing and writes for the AAII Journal. McClellan also serves on the Stock Superstars Report and Dividend Investing advisory committees. She is an honors graduate from DePaul University with a bachelor of science in business with a major in finance.

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