Amazon Introduces New Music Streaming Service

Amazon introduced a music streaming feature on Thursday that gives subscribers to its Prime service access to thousands of songs free and without interruptions from advertising.

The new feature, called Prime Music, which has been rumored in the music industry for months, has music from two of the three major record labels as well as various independents. But it omits most new releases and will not include the catalog of the Universal Music Group, the world’s largest music company, as a result of strained negotiations over licensing terms.

Amazon, already one of the biggest retailers of music downloads, is adding the streaming feature as a sweetener for its Prime customers, whose annual subscription fee was recently raised to $99 from $79. Prime subscribers get free two-day shipping on orders and other perks like free streaming for some movies and television shows.

Licensing negotiations with record labels and music publishers began about six months ago, but they were slowed by disagreements over financial terms that many music companies considered low.

Amazon told most small labels that in exchange for one-year licensing agreements they would be offered shares of a $5 million royalty pool, to be divided by a market-share formula of Amazon’s choosing, said two people involved in the negotiations who were not authorized to speak publicly about the deal. Bigger labels and distributors were offered larger one-time payments for a year of access to certain titles. Amazon initially offered a total of about $25 million in these fees, but it was unclear whether the figure changed in negotiations.

Sony and Warner Music, two of the three major labels, have signed such deals. But Universal, whose catalog includes stars like Lady Gaga, Katy Perry and Kanye West, did not reach an agreement with Amazon.

After Amazon’s proposed contracts for songwriting rights were rejected by many music publishers, the company used an outside firm to obtain “compulsory” licenses through federal copyright provisions. That process is common, but it implies that Amazon may make more limited use of songs than it had originally contemplated.

With a relatively small catalog, Amazon’s service is not seen as a major threat to companies like Spotify, Rhapsody and Beats Music, which offer millions of songs. But Amazon’s sheer size gives it a big advantage. The company recently announced that it had 244 million active customer accounts, and it is estimated to have more than 20 million Prime subscribers.

Amazon’s scale may help it reach the millions of casual music consumers who have remained hesitant to sign up for any streaming service. Those consumers are a big concern for the music industry as the streaming market matures and gradually replaces CDs and downloads as the way most people listen to music.

more details:the newyork times