In his annual letter to shareholders, Amazon.com Inc. (AMZN) CEO Jeff Bezos wrote that Amazon will only continue to grow, in part thanks to "divinely discontent" customers constantly raising expectations for the company. As the e-commerce behemoth continues to dominate online retail and smart assistants, there are still a few gaps where the company falls short -- one is streaming music. 

Amazon currently offers two streaming music options: Amazon Prime Music and Music Unlimited. The first is free with a Prime subscription; the second offers a much larger selection of music and curated playlists for $7.99 per month for Prime customers (there's also a $3.99 a month option for playback on a single Echo device).

Bezos wrote in his letter that Amazon Music has accrued "tens of millions of paid customers" and added service in 30 new countries in 2017. He also noted that Amazon Music Unlimited membership has more than doubled in the last six months, but experts say the service still lags significantly behind Apple Inc.'s (AAPL) Apple Music and Spotify Technology SA (SPOT) . Apple said in March that Apple Music had 38 million subscribers, while Spotify said it had 70 million subscribers as of the end of last year. 

A.T. Kearney principal Bahige El-Rayes said that companies like Amazon can improve services such as its streaming music platforms by looking at new partnerships for things like exclusive content or improving their technological capabilities.

"Amazon wants to be relevant across the board," El-Rayes said.

"[Amazon's music service] is a perk," noted ex-Amazon executive and supply chain consultant Brittain Ladd. "[Amazon] has to continually add more value to Prime not only to attract new subscribers, but to generate more value for Amazon."

In order to catch up, Ladd said Amazon wouldn't want to simply emulate Apple.

"Amazon makes acquisitions to close gaps," Ladd said. "Acquiring Spotify absolutely is possible, but I believe Amazon has bigger ambitions." Spotify went public on the NYSE through a direct listing on April 3, and its price has remained relatively stable, with a current market cap of about $27.7 billion.

Ladd suggested that a better acquisition target for the e-commerce giant would be Universal Music Group, one of the largest music groups in the world. Universal is a private company, but Goldman Sachs recently estimated its value at around $23.5 billion.

"When Amazon went into grocery, it didn't go buy Sprouts," Ladd said. "Amazon thinks bigger than that ... this [would give] Amazon a leadership position in all things music." Acquiring Universal would also give Amazon opportunities to offer exclusive content, similar to what its Prime Video service provides. 

Amazon did not immediately return request for comment for this story.

Needham analyst Kerry Rice said he has a hard time believing Amazon would make such a costly acquisition as Spotify, suggesting Pandora as a smaller, better-suited option in the streaming music space with a current market valuation of $1.4 billion. Buying Universal Music would "strategically hamper others," though this has not been Amazon's strategy in past deals, Rice said.

"But I don't feel today like music is the battleground," Rice said, adding that Amazon's efforts would be better spent on devices and the smart home.

"Amazon Music is a nice addition, but I don't think that's why people go to Amazon [Prime]," Rice said.

Amazon is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AMZN? Learn more now.

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