Amazon Music Is the Dark Horse of Streaming Apps

While Apple was busy duking it out with Spotify, Amazon snuck up closer to the #2 spot in music streaming

The app logos of Amazon Music and Spotify on the screen of a smartphone.
Photo: Thomas Trutschel/Photothek/Getty Images

In their 1993 classic, The 22 Immutable Laws of Marketing, Al Ries and Jack Trout introduced readers to the Law of Duality, which states that every market eventually becomes a two-horse race at the top. There are a lot of classic examples of this law in practice — Coke vs. Pepsi or Crest vs. Colgate, for instance — but a more recent example is music streaming, where Spotify and Apple Music have been duking it out for years. While it may seem like their duopoly at the top is unapproachable, another law from Ries and Trout’s book makes me believe one of their challengers is poised to take Apple’s spot.

The Law of the Opposite

In the music streaming race, Amazon Music is usually an afterthought.

However, as Spotify and Apple Music have been battling for ear-share, Amazon Music has quickly risen to the third spot. Over the last few years, Amazon has grown subscribers at a higher rate than either of them and closed 2019 within 4% market share of Apple Music.

Ries and Trout’s Law of the Opposite helps explain Amazon Music’s success despite the two streaming giants duking it out for the top spot. The Law of the Opposite states that in strength there is weakness. Whenever a company leans on its strengths as a business, there’s an opportunity for a competitor to turn the tables by focusing on dominating areas where the leader is weak. Ries and Trout cite a trap that companies often fall into: trying to be better when they should be trying to be different. In music streaming, this definitely seems to be the case. Spotify has distinguished itself as the top music streaming app by focusing on millennials and building a beautiful product centered around personalization, discovery, and playlists curated by tastemakers. This strategy helped it capture 32% of music streaming subscribers worldwide in the first quarter of 2020 compared to Apple Music and Amazon Music, with 18% and 14% shares, respectively.

Apple Music has tried to compete against Spotify by using similar product and design strategies targeting a similar millennial user base. Apple enlisting Drake and Dr. Dre for playlist curation may endear the company to artists, but don’t seem to be moving the needle for subscribers. As Spotify continues doubling down on tastemakers in podcasting with acquisitions like Gimlet Media, The Ringer, and an exclusive partnership with Joe Rogan, it feels inevitable that they’ll steal subscribers from Apple Music.

Amazon is targeting the price-sensitive music consumer that doesn’t care about tastemaker curation.

And beyond targeting the same audience with similar products, Spotify and Apple Music have nearly identical pricing for their packages. Both offer an individual plan for $9.99 per month, a family plan for $14.99 per month, and a student plan for $4.99 per month. The only differences are Spotify’s recently launched Premium Duo plan — which allows couples to listen on the same account for $12.99 per month — and the fact that Apple offers an annual plan for $99 per year, while Spotify does not.

Amazon, on the other hand, has seemingly watched this play out and made a point to do the exact opposite.

Standing out from the competition

While Apple has been busy fighting Spotify, Amazon Music has been quietly offering a far denser array of subscription options centered around one key principle: being different.

To start, Amazon Music has two different freemium plans: Amazon Music Free and Prime Music. Amazon Music Free offers an ad-supported selection of top playlists and thousands of stations for free. This plan is similar to Spotify’s freemium offering, which is ad-supported and allows users to listen to any playlist, artist, or album in shuffle mode.

The last time both companies reported their demographic breakdown, the 55 or older crowd made up 14% of Amazon Music’s subscriber base and only 5% of Spotify’s.

Prime Music is different. Users get an ad-free experience and can listen to up to 2 million different songs, plus thousands of playlists and stations. Prime Music plays a multifaceted role in Amazon’s strategy, as both a way to drive Amazon Music Free users to upgrade to Amazon Prime and a funnel to drive Prime members to upgrade to paid music plans.

And if Prime Music users find their favorite artists missing from the selection of 2 million songs, there’s Amazon Music Unlimited. Unlimited is the closest equivalent to Spotify’s Premium plan and Apple Music’s individual plan, which both cost $9.99. Amazon continues the value play here by offering Unlimited at $7.99 per month for Prime customers, a 20% discount to Spotify and Apple Music (for non-Prime customers it’s $9.99, the same as Apple and Spotify). Amazon also offers an annual option for $79 per year, $20 cheaper than Apple’s — that is, if you ignore Amazon’s $119 annual Prime membership fee.

These options make it clear that Amazon is targeting the price-sensitive music consumer that doesn’t care about tastemaker curation. While not the only factor, this is likely a big reason Amazon Music has had success with an older demographic. The last time both companies reported their demographic breakdown, the 55 or older crowd made up 14% of Amazon Music’s subscriber base and only 5% of Spotify’s.

While positioning themselves as the cheaper alternative to Spotify and Apple would likely be enough to snag some market share, it wouldn’t make Amazon a true opposite. This is where Amazon gets creative.

First, Amazon offers an HD plan targeting audiophiles that want CD-quality sound or better. The HD plan offers 60 million tracks in HD, and is compatible with Echo devices, giving Amazon Music another path to new subscribers by drawing from Echo customers who prioritize sound quality, but don’t want to pony up for a Sonos or Bose. While smaller streaming competitors like Tidal and Deezer have similar offerings, neither Spotify nor Apple differentiate plans by sound quality.

Amazon knows they can’t beat Spotify from a product perspective, so they’ve optimized their entire packaging strategy around areas where they can win.

Amazon’s most creative offering is the Echo-only plan, which gives users full access to Amazon Music Unlimited through a single Echo or Fire TV device. At $3.99 per month, the Echo-only plan can stand on its own but is also cheap enough to complement another subscription, even if it’s not Amazon Music.

Amazon knows they can’t beat Spotify from a product perspective, so they’ve optimized around areas they can win: pricing, connection to Amazon Prime, device-specific plans, and HD offerings that give prospective users a list of reasons to consider Amazon Music over Spotify.

The biggest question here is how Apple responds, and more importantly if they respond at all. Lately, it doesn’t seem like music is high on their priority list. Compared to the future of their hardware, like the iPhone, Apple Watch, and Airpods, it just doesn’t seem like music streaming holds as much weight on their product roadmap.

If they do respond, Apple has plenty of levers to pull. While Amazon has leveraged Prime and the Echo to create differentiated offers, Apple could do something similar with AirPods, Beats, and their other devices. Perhaps even more interesting would be the much-hypothesized bundle offer of Apple Music with Apple TV+ and Apple News+.

Whatever they choose to do, they need to act fast. As Spotify continues to edge ahead of Apple by building out its exclusive podcasting lineup, Amazon is putting on a clinic in differentiation by chipping away at the price-sensitive and fringe crowds to continue gaining market share. And it seems to be working. Soon, it may be the reason there’s a new #2 in town.

A version of this article originally appeared in Good Better Best.

Strategist @ ProfitWell. Analyst @ https://goodbetterbest.substack.com/

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