Amazon, Pandora develop lower-priced streaming tiers

DENVER BUSINESS JOURNAL - Amazon and Pandora appear poised to launch new streaming-music initiatives that have the potential to shake up key norms in the nascent industry.

Announcements could come within weeks, according to The New York Times, and the new tiers of service offered by the companies could be priced at as little as $5 per month. That stands in contrast to the $10-per-month price point that has become familiar in the industry, serving to further test what consumers will pay for streaming services. It also could sharpen the longstanding battles between major tech companies to draw customers into their respective ecosystems.

While the major streaming services have largely settled on $10 per month as a standard price point — a level driven mainly by record companies that don’t want their product to be any cheaper — and people have been willing to pay that amount, it remains unclear whether that sum makes for an optimal system, the New York Times said. For example, in June 2015 another major player in the space, Spotify, said it had 75 million active users, and 20 million of them had paid for subscriptions that remove advertisements and allow users more functionality on mobile platforms, according to the Financial Times. Converting more than one-quarter of users into paying customers may seem like a reasonably successful rate, especially since, as the New York Times pointed out, Google’s (NASDAQ: GOOG) video-streaming service YouTube is considered the world’s most popular music source and makes virtually every popular song available on its site for free.

The New York Times quoted one expert suggesting Amazon (NASDAQ: AMZN) and Pandora (NYSE: P) may be lowering prices even though there’s limited evidence more customers would pay those lower prices. For example, the Times described how one-time streaming music competitor Rdio tried selling a plan where customers would pay $4 per month for a subscription, but that model didn’t even last a year before the company went under.

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