Apple Music Didn't Kill Spotify. Amazon's New Streaming Service Won't, Either.

Amazon is working on a 'Spotify killer'. 

Sound familiar? Apple Music was hailed as such by basically everyone. Google's All Access was called the same, back in 2013. Even Tidal got the label. 

And now it's Amazon's turn. As first reported by the New York Post, execs from Bezos-land have started chatting with the music industry about licensing, whispering details of a $9.99-per-month streaming service. The product would replace (or at least supplement) Amazon's existing digital music offering, Prime Music—which is a perk of Prime membership, more than anything else. You can stream about a million songs, but you don't get the current hits. (Digital Music VP Steve Boom commented in 2014 about today's pop not having 'staying power'; more likely it's that they want listeners to actually buy the new stuff.) 

Amazon, like Apple, has something Spotify doesn't: a built-in user base. Nearly half of US households have a Prime membership, which likely explains why Prime Music tripled its streaming hours last year. But, as Apple Music teaches us, a massive pool of potential users doesn't mean an automatic toppling of the industry leader. 

Yes, Apple Music has 10 million paying subscribers, about half of Spotify's current paid subscriber count. And it got there in less than six months(!). But considering there are more than 100 million iPhones in the US alone, and the service is pre-installed, that 10M number isn't quite as impressive as it first appears. Especially when you take into account Spotify's strong free tier: Apple has about 15 million users when you include those in its trial period, while Spotify (at last count) has more than 75 million active users.

Furthermore, Apple Music seems to be attracting an older audience: 62% of users under 35 canceled their subscription after the free trial. 67% of users over 35 are now paid subscribers. To be clear, I think that's a great thing. As I noted back in June, there's room in the industry for more than one streaming service. BTIG analyst Rich Greenfield told Quartz: "It appears that Apple Music has expanded the market for paid subscription music [instead of] taking share from Spotify." 

To me, that's a win: as tech giants get into the game, it grows the pie. 

For both Apple and Amazon, streaming service dominance is—from a revenue perspective, at least—a nice-to-have, not a need-to-have. Quartz estimates Apple's yearly revenue from Music to be $1.2 billion; in the company's latest earnings call, fourth quarter earnings came in at $75.9 billion. Even if they surpassed Spotify, currently valued at around $8.5 billion, Apple Music's subscription revenue would still be chump change for the Cupertino company. Rather, success in the streaming world is a status move: these guys revolutionized the music industry with the introduction of iTunes, and Apple Music (if it lives up to its legacy) could prove that they still got it. 

For Amazon, the motivations are likely similar. The Seattle-based company is becoming increasingly entrenched in users' lives; they're taking over, one industry at a time. Just look at Sundance: Amazon is one of the festival's top buyers this year, shelling out millions for some of the most sought-after flicks. 

"You've got Amazon, and how many billions does that guy have?" says SPC's Tom Bernard, referring to Amazon founder Jeff Bezos. "If he loses $12 million on a movie, it's not going to hurt him — and the amount of publicity he'll drum up from buying it will make a difference."

And that, right there, is the crux of it: for Amazon and Apple, a streaming service won't ever be at the heart of their businesses. Launching a music streaming product is a move to stay relevant, stay dominant, and stay at the forefront of burgeoning industries. It's a gamble, but one that both companies have the capital and brand security to be able to make.

Meanwhile, Spotify is stepping on Amazon's turf—sort of. 

Spotify, of course, is in the opposite situation: it's always been a music streaming service, full stop. Until now.

Just last week the company took its first steps into the uber-hot world of video, adding content to its iOS and Android apps. Right now the feature is relatively tucked away, sitting in 'Browse', but this is clearly just phase one. The app has clips from Comedy Central, Vice News, ESPN, TED, NBC, Slate, and many more. The move is a smart one for a company that has yet to be profitable; it's a way to increase engagement within the app, and you can bet it won't be long before advertisements start creeping into the video offerings.

But I don't think it signals a larger shift for Spotify, the way Rdio tried to take on Amazon and Netflix with Vdio. No, it's much more like Snapchat's Discover section—a way to increase users' time within the app, using that all-powerful king: content. 

What this video addition will do is give Spotify an even more tantalizing package for advertisers. As MIDiA analyst Tim Mulligan notes: "In some respects, Spotify can be viewed as a data company firstly, and only secondly as a music service." Spotify will glean even more data and engagement from those pesky Millennials, the hottest demographic in town. And while Amazon and Apple are aiming large and trying to be everything for everybody, Spotify is doubling down on its sought-after user base, providing more value for its core demographic. 

And, I would wager, that means Spotify will be around for a long while.

So: how successful do I think Amazon's streaming service will be? That depends, although there's no reason to think it won't nab a decent chunk of the streaming service pie. But I think that will add to a competitive field, rather than take down the current champion.