Amazon Talks to Music Labels About a Streaming Service

Amazon gives away movies and TV shows to people who join its Amazon Prime subscription service. When will it start giving away music, too?

Maybe this year. People have been predicting that Amazon would offer a Spotify-like music subscription service, most likely bundled with its Prime delivery option, for some time. But industry sources say Amazon is now engaged in more serious talks with big music labels about making that happen.

Which doesn’t mean it will: One label source reports that Amazon isn’t close to getting a deal done, because its executives are asking for a substantial discount on the pricing the labels have given to other services, like Spotify, Rhapsody and Beats.

Still, label talks have been going on for the past few months, sources say.

The basic logic: Amazon gives away a Netflix-style video service as a way to reward Prime members, who pay $79 a year and get free two-day shipping, among other perks. So if they’re willing to do that — under the theory that the cost of the video is worth it, because Prime members buy a lot more stuff from Amazon than nonmembers — why not make the service even more attractive with free music?

Earlier this year, Amazon told Wall Street that it may raise the price of Prime by as much as $40, to $119 a year.

Amazon has been beefing up its roster of executives with digital music experience in the last few years. In October 2012, it hired Michael Paull, a Sony music executive, to head up its digital music operations. At the same time, it brought in Drew Denbo, who had handled business development at streaming services Rhapsody and MOG, to do the same job at the e-commerce site. And last year it hired Adam Parness, who handled licensing for Rhapsody.

If Amazon does go ahead and cut a deal with the labels, it might want to think about the best way to promote its service to users. While the company is thought to be spending more than $1 billion a year on video content for Prime users, the industry consensus is that streaming usage is low (a notion supported by outside surveys of broadband usage) in large part because many Prime subscribers have no idea they have access to movies like “The Avengers” and TV shows like “The Americans.”

Amazon, as it almost always does, declined to comment.