This is the second part of our Amazon Music piece, based on a face-to-face interview in February that was being held for our Q1 2020 report in early April.
Given the impact of the Covid-19 coronavirus pandemic since February, we had a follow-up conversation with Amazon Music VP Steve Boom. Part one is based on that interview, but everything below is from the February meeting.
In mid-January, Amazon Music announced that it now had more than 55 million streaming customers, with its VP of music Steve Boom telling the Financial Times that “nearly all” of them were paying for a subscription, rather than using the ad-supported tier.
The figure included Amazon’s full range of subscription tiers, from the Prime Music service bundled into an Amazon Prime membership through its single device plan, Amazon Music Unlimited, and Amazon Music HD.
The January announcement noted that subscriptions to Amazon Music Unlimited, the $9.99 tier, had grown by more than 50% in 2019.
When Music Ally talked to Boom in February, he stressed that the growth had been global. While the US continues to be “really strong” for Amazon Music, the UK, Japan, Italy and Mexico were among the “standouts” in 2019 for the service.
“Historically, you looked at Amazon Music and we were really strong in the US, the UK, Germany and Japan, which were our four anchor countries,” he said. “But last year was really when we started to see getting scale in a bunch of other countries as well, which was exciting.”
Brazil is also fertile territory for Amazon Music, which launched there in August 2019, at the same time as its parent company launched its core ecommerce business there.
“Based on the first few months, I’m very, very optimistic. I think Latin America is going to be a big strength for us going forward, which is exciting,” said Boom.
Globally, Amazon Music’s growth has historically been driven by funnels including Prime memberships, Echo sales and the company’s established base of CD and MP3 music buyers. However, Boom suggested that 2019 was a tipping point where growth began to come from other sources too.
He’s also pleased at the performance so far of the ad-supported tier. “Like everything else we did last year, that’s exceeding our expectations in terms of becoming a new growth driver. We only launched that in a few countries, but not surprisingly, that’s going to roll out around the world this year.”
Boom also said that the $14.99-a-month Amazon Music HD is also exceeding expectations. “Our initial anticipation going in was that it would be almost all upgrades: people that are already subscribing to Amazon Music Unlimited. ‘Okay, $5 more, I’ll upgrade to the HD tier. And what we’ve actually seen is a significantly higher percentage than we anticipated of people who are going straight from not even being an Amazon Music customer, or just using Prime Music, to going straight to the HD tier,” he said.
Amazon Music’s single-device tier doesn’t get written about much, even when industry pundits are calling for streaming services to break out of their $9.99-a-month templates. Boom suggests that its innovation is to make the restriction the number of devices it works on, rather than on the catalogue or the listening.
“It’s fully featured. There’s nothing different about it [to a standard subscription service] except that you can’t take it with you. When we first talked to the labels about the single-device plan, it was a pretty simple pitch,” said Boom.
“It said: They’re going to come on to this device. A lot of them are going to upgrade when they decide to pick up their phone. If they never upgrade, you were never going to get them to pay for music anyway. So either it’s going to be a low-cost on-ramp: ‘Oh, $3.99, that’s great. Oh, now I want my phone, now I’m willing to pay $9.99’.”
“It’s a much easier jump for a listener, who’s already familiar with the concept of streaming, to pay a bit more. Or, maybe they don’t want to listen on their phone! And then $3.99 makes total sense, and that’s now found revenue for the industry.”
Firth noted that in Amazon’s physical music business, 70% of customers spend £30 or less a year, making £120 a year (for a £9.99-a-month streaming subscription) a big leap for them.
“You have to think about different ways of bringing people in so it expands the market segment for music streaming. That, as well as the huge simplicity that comes with voice, have been the two things that have really changed the game. It’s about expanding the number of people who feel that music streaming is for them.”
For the music industry, voice is an interesting subject. Every industry conference has its smart speakers panel, with people confidently declaiming that voice access will change the way we discover and listen to music.
Useful advice on what artists and the teams around them should do to capitalise (or just to ensure they are being discovered through Alexa and other voice assistants) is still rather thinner on the ground, although some labels are trying to reverse-engineer those recommendation algorithms…
“Which is not what we want them to do!” said Boom. “We’ve heard: ‘Should band names be optimised? Should song titles be optimised?’ Our answer is consistently: please no!”
“Please let the artists create the art they want to create. Let us figure out how to make Alexa understand how listeners can get to that. The last thing we want is for the technology to drive the creation of art. The artist should do that.”
Boom suggested that the music industry’s understanding of the importance of voice and its potential is good.
“Streaming used to be all about the smartphone. And then we came on and said well, it’s actually about the home too. And they also see now that the obvious interface when you’re in the car is voice. Amazon’s been very active in striking partnerships with auto manufacturers,” he said.
“So a lot of the people I deal with at the record labels are super excited about that, because if you describe streaming as ‘phone first, home second, car third, then obviously Amazon’s in a great position there because voice is the interface of choice very clearly in the home… consumers have spoken, no pun intended. But the same is true in auto.”
Firth agreed (unsurprisingly) with the point about not trying to reverse-engineer Alexa, and reiterated Amazon’s advice to labels on that front.
“Don’t try and beat these algorithms. Just make sure they’re fed with the correct information, and the right thing will come back out. Because playing them what you [labels/Amazon] want to hear is not the right answer. Playing them something that means they carry on listening to music and carry on paying money and being subscribers for many years? That’s the right answer.”
Boom said there is still work to be done to ensure artists can not just be found through voice interfaces like Alexa, but build strong connections with the listeners who love their music. He’s keen to avoid the ‘dry streams paradox’ afflicting artists whose music may be getting lots of streams from playlists, but who aren’t getting much engagement beyond that.
Voice, on the other hand: “It’s going to really play well to artists who are able to develop a fan connection, because then that artist becomes a brand. When you don’t have a visual interface, that brand is important,” said Boom.
“I view that as one of the primary roles of a streaming service: how to connect artists and fans together, not just how do I play a song? I think going forward, that’s something that you’ll see increasing focus on. The deeper that artist’s repertoire and the deeper that artist’s connection with their fans, the better they’re going to do.”
Firth suggested that one of the wrong assumptions made about voice-driven listening is that it’s ‘lean-back’ – more casual, rather than actively choosing what to play.
“It’s really not. Yes, there’s an element of that, but a lot of people ask for a particular artist, a particular song, a particular playlist. It’s just as interactive, if not more so, than anything else, because it’s so easy to interact with,” he said.
“Even then, the ability to say ‘Alexa, what is this song?’ to get that information you’re missing… So it’s a very engaged form of listening, and one of the mistakes people sometimes make is that they think it’s the equivalent of lean-back.”
Amazon has been putting a lot of effort over the past year into its roster of programmed playlists – not just curation, but promotion of that curation so that people know to ask Alexa for them.
For example, when the service commissions original tracks or exclusive sessions from artists, they’ll now be linked to key playlists: “We’ll use it as a way to talk about the playlists… to help us underline the importance of those playlist brands,” said Firth.
That led on to a discussion of what the culture of Amazon Music is, and how that might differ from other streaming services like Spotify and Apple Music. Is it more mainstream, and also leaning a little more away from hip-hop and pop, as is often assumed within the industry?
“It’s the most diverse set of listening of any service,” said Boom, preferring not to couch this in terms of any particular genre being less popular.
“In the US, all genres are represented in our top 50 or top 100. Of course, in the US hip-hop reigns supreme on streaming, and we have a lot of hip-hop in the top 100. But we also have rock and pop and country, and you might even see a jazz or classical track pop in now and again,” he said.
“We don’t want to just appeal to one group. That doesn’t mean we want to be vanilla and try to be everything to everybody. It’s more about appealing to each group, as opposed to being something that doesn’t have a defined personality.”
Arguably, streaming services are still a way off establishing the strength of identity and personality that a (great) radio station has. The competition between those two media, and any migration from radio to streaming, remains a hot topic for the music industry.
Boom notes that radio has been “amazingly resilient” so far, even during streaming’s peak growth years, pointing to its continued appeal around its live nature and the personalities of its DJs.
“This feeling that you’re part of something going on right now. Streaming is very different. But there’s no doubt that there’s a migration happening. Over which time period, different people have different opinions,” he said.
Two of Boom’s children are teenagers, and driving. “They don’t get in the car and turn on the radio,” he said. “I’m not suggesting that they represent all teenagers, but they’re the two I know! They get in the car, and they’re Bluetoothing an Amazon Music playlist – either one that we make or one that they made themselves – to their car stereo. That’s a big shift. And even among other generations… the share of ear, so to speak, is definitely moving.”
Boom noted that there’s also plenty of “publicly reported numbers” suggesting that streaming-radio listening is in decline – while he preferred not to mention a competitor by name, it was pretty clear that Pandora was the company in question – while on-demand streaming has been growing quarter by quarter.
“That’s not to say there aren’t elements of radio that are great, but from pure music listening, I don’t know how you beat on-demand streaming. Because you can get the lean-back programmed experience at the same time as ‘oh, listen to that song again'” said Boom.
“We are in an on-demand media consumption world, which I think presents real challenges for a radio-only format. That’s where streaming is so amazing. But like I said, there are elements of it [radio] that are great, and provide things that music streaming doesn’t.”
One way of providing those things – speech, specifically – is podcasts. Spotify has moved aggressively into that space, while Apple has always been strong in it, albeit still keeping its Podcast software separate from Apple Music.
Amazon? It has spoken-word with its Audible audiobooks service, which has also commissioned original podcasts for its subscribers. On its smart speakers, Alexa can also serve podcasts via integrations with TuneIn and various podcast services’ skills – not to mention Spotify and Apple Podcasts.
For now, there’s no news on podcasts being part of Amazon Music. “I can’t talk much about it,” said Boom. “We watch. We read the same things that you read. I don’t talk to them [Spotify] like you do, we’ve been noting with interest how much time they’re spending on podcasting, but I don’t really have much to say on it.”
Firth chipped in: “What I’d want you to leave with is that we’re still really excited about music…”