This free music service follows on the heels of its free video service launched last year. By offering videos and music for free, it's using content as its greatest differentiator to break the clutter in the e-commerce domain.
E-commerce continues to be Amazon's main cash cow. However, it is a tightly fought game where it competes with Flipkart which also owns Myntra and Jabong. While both Amazon and Flipkart has deep pockets, (Flipkart recently closed its latest round of funding to the tune of Rs. 4472 crores), Amazon is using its content strategy to differentiate itself from its competitors.
Amazon uses its prime membership as the honey trap to gain loyalty from its customers. The company was quick to realise that just competing on price alone is not a viable strategy. Reducing the price may attract the customers but it also eats into the already thin margins. Besides, discounting is never a long-term strategy. That's why Amazon is betting on offering heavy benefits to its prime customers via video content and now music content.
When customers fork out Rs. 999 for a prime membership, they not only get free shipping but also get unlimited access to its prime video and prime music service. Customers can legally download any music they want from its music service. Its databank is massive and contains music from all regional languages in India.
With this new launch, it's now taking the fight directly with Apple Music and local Indian players such as Gaana and Saavn. Apple Music costs Rs.120 per month. Saavn pro version costs the same and Gaana charge Rs.250 per month for unlimited downloads. Now, these companies must feel awfully uncomfortable because it is very difficult to compete with a company that offers its music for free. Saavn and Gaana are standalone companies who must make money for them to survive and charge for their services is the only way to go. For Amazon, it is perfectly okay to make losses on its music service because it will make up for it in e-commerce.
In a cost-conscious market like India where the customers are hard-nosed seekers for value for money, Amazon's Prime strategy hits the bullseye. With the huge upswing in mobile phone adoption and fast broadband, thanks to the Jio effect, the content consumption is fast moving from the TV screens to the mobile screens. Offerings such as video and music are powerful services that the consumers highly respect. In the long run, Amazon will steamroll its competitors. With a loyal army of consumers, it will soon start focusing more on niche areas of e-commerce. I must admit that I have been a long-time user of Amazon and its bouquet of services are far too enticing for me to look elsewhere.
In the future though, I'm sure that Amazon Prime Video and Prime Music will start to be profit centres of its own. For example, Prime Video is taking on Netflix head on and investing heavily in original content production. While Prime Music only licenses music, it's just a matter of time before they start donning the hat of a music label company. Don't be surprised if Amazon Music becomes one of the world's largest music production companies.
Kiruba Shankar is a digital entrepreneur, a Professor of Digital Media, a Podcaster and author of 5 books. He is a keen observer of digital trends. He can be reached at Kiruba@Kiruba.com