BOOM GOES THE STREAMING BIZ

Amazon Music has upped its marketshare considerably of late and emerged as the #3 player in the burgeoning streaming field—powered in large measure by the explosive growth in voice-activated tech such as Amazon’s Alexa-powered Echo. We asked VP Steve Boom to break it down for us; we imagine he immediately regretted putting us in his cart.

Let’s start with your growth in the streaming space. It seems that Amazon Music has played a big role in on-boarding a lot of consumers who weren’t previously streaming. How was that achieved?
We have data that corroborates that. I think it’s been achieved in a couple of different ways. The first was just launching Prime Music and a bundle service as part of Prime membership. We started seeing people streaming on-demand who weren’t before. You have to remember Prime Music was [launched] a year before Apple Music, so the marketplace was very different than it is today. Streaming was less understood by consumers. Streaming tended [toward] Pandora at the time. Spotify was much, much smaller.

We know we played a role in validating that this is something consumers should be doing —bundling it in Prime Music, all the great premium features that you would normally have to pay $10 a month for, whether it’s offline access or ad-free. We gave a great experience; people say it feels more like ownership. We took away the things that didn’t: “What do you mean, I can’t take it on my phone? What do you mean, I have to listen to an ad to hear a song?” We made it very easy for them to understand.

The other factor would be the Amazon customer base as a whole. It looks a little bit different than the other streaming services. Historically, [DSPs] are very focused on the 15-22 market segment. Starting with Prime Music, we’re going after our Prime members—people who spend a lot of money. I think that changed some things as well. The Echo— which launched in Beta after Prime Music—became widely available a year later and really took off during Christmas of 2015. That’s when Echo really started to pop.

I want to drill down into Echo and voice-activation hardware questions.
The simplicity of the technology—of just using your voice—opened up streaming to people who otherwise maybe don’t want to listen to music on their phone, which is an unnatural activity for entire groups of people. If you’re 15-22, of course, it’s totally normal—you live on your phone. The phone is glued to your eyeballs, practically.

And streaming is a normal thing if you’re that age.
I have teenagers, so I understand the glue that connects them to their phone. But there are other populations for whom that’s not the case. The Echo is a combination of being simple and being in the home.

There’s also price point: Our $3.99 a month plan has encouraged people to come on board. If you think about the experience of an Echo, it’s not complete without the music service, right? It’s a speaker. So, when people buy the device, the first thing out of everyone’s mouth is “Alexa, play such-and-such.” I think if you surveyed some of those people, “Are you streaming music?” I’m not sure what their answer would be.

It seemed like one of the big obstacles was people saying, “Streaming…like, do I have to dial up music and make playlists? I don’t have time for that.”
That’s the simplicity we always love to talk about; it creates this magical moment the first time someone uses an Echo. I still remember showing it to record executives really early on; I’d have Alexa play a popular song from their artist, and their eyes would just bug out.

Every customer has that reaction. It takes all the work out of it. “Hey, I want to hear some jazz music right now,” or “I know there’s a new song by Kendrick —play that,” and it just starts playing. Isn’t that brilliant—and the way it’s supposed to be?

If you compare Amazon Music charts to the ones on other services, you’ll see a more diverse set of genres represented. Of course, you’ll see hip-hop, as with everyone else, but you’ll also see country and other genres. The country audience was later to the game in streaming— they bought a lot of physical product, and still do. We knew it was an important, growing genre. We saw opportunities—we have a core fan base there that’s disproportionate. We see a higher level of country listening than the industry average, and we made a deliberate decision to invest more in Nashville, invest in artist partnership and personnel in Nashville for marketing, sponsoring the CMA festival. It’s paid off very well for us. When I meet people in Nashville and tell them I’m from Amazon Music, their eyes light up.

The inclusion of Kane Brown in your new ad campaign certainly illustrates that.
I saw a bunch of managers at a gathering, and everyone was really excited to talk to me; the ones from Nashville, including Kane’s manager [Martha Earls], were super-excited and said what we’re doing in Nashville is really terrific.

We have people who listen to all genres. In fact, hip-hop is growing really quickly on our service. Historically, rock, country and pop have been represented better in Amazon Music than other services. We’re starting to see hip-hop grow more quickly in our service, and I don’t think it’s ever going to overtake or become the 49-50 songs in the Top 50 that you see on some of the other services. But it’s going to continue to take an important share in our service over time.

People are much more genre-fluid today. They’re open-minded. I think that’s partially because we live in a playlist-driven era where it’s song by song, it’s easier for people and on-demand.

I think this is probably an aspect of the on-demand world that hasn’t completely sunk in for a lot of people. You can explore endlessly.
Adults have less time to do it, no doubt. That’s [why] we’re so excited about the voice interface. We think that it really promotes that kind of exploration. If something pops ino your head, it’s easy just to say it. Instead of putting on my same old playlist for a dinner party, “Hey Alexa, play some jazz for a dinner party.” Boom! I’m discovering music and having that serendipitous moment. If it’s just me going through my old iPod and flipping through my old playlists, I’m listening to the same music every time. It’s a lot of work to create playlists.

What is the next frontier for the music-listening experience overall?
We still are in the early days of streaming, and there’s just so much growth left. Outside the United States and Western Europe, we expect more growth on a percentage basis in some of the smaller or less-developed countries from a streaming perspective.

Even in Asian countries, physical retail is still dominant, and streaming is just getting off the ground.
India is a really interesting place. We just launched there this year, and it’s going incredibly well. That’s a country where there’s been so much piracy. Now you see streaming really taking off.

It’s true, we obsess over our customers, not our competitors. I really don’t wake up and think [about] how we’re doing against the other guys. I really think about how are we going to serve our customer base: How are we going to develop our product in a way that’s attractive to them?

What is the next way in which people can experience the Amazon Music interface that they haven’t before?
Streaming isn’t going away. That’s clear. Now it’s the question of, how do you make it easier to access, more personal, at every moment?

Here’s an example of something we just launched a couple months ago: About a year ago, we added Alexa into our mobile phone apps. So, if you’re using our app on Android or iOS, you can talk to Alexa. But it’s a push-to-talk interface. We actually added the concept of the wake-word on a mobile phone. If the Amazon app is open and you’re driving your car—this is where it’s an amazing interface—you just say, “Alexa,” like you would in your home. It makes everything so much easier, faster and, in the car, safer as well.

I think that is the frontier, continuing to make it easier to use, making it more natural. That’s one of our big missions. How do we make the voice interface as natural as we can make it, so it feels like you’re talking to a friend about music? That’s our mission statement.

What about recommendations? Is there a component that can aid discovery and exploration?
No doubt about it. As we get more data about what people like, different types of input, time of day, context, all that kind of stuff, I think you’ll see [Alexa], over time, get more personal and suggestive.

But with Alexa, we don’t want her to become overbearing or to be interrupting you. That’s not a good look. She’s supposed to be helping you, not overriding you. We will test that and experiment like we always do. We will see what customers tell us, if they like it or don’t like it. That’s what matters most to us: Is this resonating with our customers?

What are the different subscription tiers and how are they differentiated? How is their growth comparable?
We have a two-tiered music service under the Amazon Music brand: Prime Music and Amazon Music Unlimited. They’re both premium and sit behind a paywall. One is bundled with your Prime membership and the other is an add-on, but they’re both premium—with all the features you would expect: offline listening, unlimited skips, ad-free.

The difference between the services is the size of the catalog. Prime Music has over 2 million [curated] songs; Amazon Unlimited is a full-catalog service. If you want to pay and subscribe to Unlimited, we have a couple ways that you can do that. Like others, we have an individual or a family plan.

With a lot of support from the labels, which we appreciate, we saw the opportunity of the strength of the Echo to create a fully featured and fully cataloged [subscription] at a lower price. There’s a subscription plan to Unlimited for $3.99 [where] you can listen on a single Echo device or Fire TV device.

We think to get the most out of Alexa, you need to have a full-catalog service. We work with the labels, and we know there are people who love their Echo and want to subscribe to have that full experience. Maybe they don’t want to listen to it on their phone; maybe they don’t want to listen to it on their TV or laptop. So let’s constrain it to that single device, but it should be at a very attractive price.

Basically, if you subscribe to that and pick up your phone to download the Amazon Music app and you try to access music, you’ll get a pop-up that says you’re a subscriber but can only use it on that single Echo, but that you can click to upgrade and listen on all your devices. It’s that simple. It’s a great on-ramp.

We’ve shared the data around conversion rates. People use their Echo devices a lot for music. If you use something frequently and it’s priced well, you’re going to keep paying. It’s logical and that’s what we’ve seen.

We do upgrade a healthy percentage of customers who started at that lower-cost plan into the higher priced, multi-device tiers and multi-user plans.

What would you like the music industry at large to understand better? What do you think needs to happen on their end for streaming to grow more vigorously?
I used to say before we ever launched Unlimited that the music industry needs to stop thinking through the lens of “one size fits all.” To their credit, they’ve worked with us both on Prime Music and the single-device plan for Unlimited. Neither looks like anything else anyone’s ever done.

I’ve been in this job for almost seven years. From the time I started to now, you can see the rights holders being much more willing to license innovative services that they think can grow the marketplace. I think that’s fantastic; they should continue to do that. Also, to support artists of all different genres—not just follow one genre and put all your A&R into that. As we’ve proven, the listening population is quite diverse in their taste. Don’t put all your money behind this shiny new object, because you will alienate a bunch of other new customers—which will inherently stunt your growth. There’s more money to invest in A&R, and they should invest it wisely by thinking about what’s going to grow in the future, appealing to all demographics.

A lot of the growth to come in the industry is in the harder-to-reach, slower-to-adopt segments of the population. Whatever demographics that leads to, I don’t actually know. It’s not young versus old; it’s far more complex than that. My advice would be to continue to open new models, over-invest in the areas that are winning but also make sure you’re investing in other areas as well. One thing’s for sure: Once you try streaming, there’s no going back. It’s so much easier. Even more valuable, for $10 a month, what you have access to is mind-blowing.

You’ve expanded your team a bit and brought in a number of people who have music industry backgrounds. How is that changing the dynamics?
The one common thread we look for is: Are they passionate about music? Not whether they come from music, but are they passionate about music? Even in our software development talent, we like to find those types of people, because they’re more passionate about the work they are doing. Once you get past that hurdle, we’ve really tried to strike a balance between more classic Amazon executives and people from the industry with greater insight into how we can work more closely and authentically with artists—and songwriters, labels and publishers.

Andre Stapleton is leading the label-relations role. It’s super-valuable to have someone like him; he has relationships at the label level and really understands their issues and how they think. I think that’s how you become a better partner to the label. The feedback I got from the labels once they knew Andre was joining was very positive.

Dan McCarroll joined our team six months ago. Similarly, he’s so phenomenal [at] working with managers and artists and producers; he brings a dimension that none of us have.

What’s your day like?
I’ve got the best job in the music business. I don’t ever have two days that look the same. I obviously spend a lot of time externally, whether it be [with] record labels, publishers or managers, and then I spend a lot of time on the product. I spend most of my time around the voice experience. Sometimes I could be in internal back-to-back meetings. I could be reviewing a proposal for a new product feature. One hour reviewing our finances, the next hour something that’s been super-fun lately that you guys wrote about: this new advertising campaign. I love those parts where I get to be creative. That’s my favorite part of the day. Sometimes it’s marketing, product, finances, or sometimes it’s working with a partner. With that new ad campaign, I’ve had some of the most fun conversations yet, because we’re so excited about the creative direction for the campaign. I do travel a lot as well. Sadly, I’d say I know SFO Airport better than I ought to. I also know the Seattle Airport better than I ought to. I finally learned that I should fly to Burbank, not to LAX [laughs]. My day is all over the place.