Updated to include information about music publishers.
In an already crowded music streaming industry, Amazon's larger-than-expected entrance is sure to raise the pressure on both Pandora (P) and privately-held Spotify, which are still not profitable, as well as on Apple (AAPL - Get Report) Music, which has grown to 17 million users since launching two years ago but has had its share of growing pains.
Amazon said on Wednesday that Amazon Music Unlimited will offer an expanded music platform to give members of its popular Prime program on-demand access to "tens of millions of songs" as well as playlists and curated radio stations. The program will be priced at $9.99 a month, the same as Spotify and Apple Music, but will cost just $7.99 a month or $79 per year, for Amazon Prime Members.
The service is a big step up from Amazon's two-year old Prime Music offering, which provided a much smaller selection of songs, a library of two million, for a target audience of so-called casual listeners not looking to actively curate their music listening.
The key to Amazon's new offering is that its tied to its Prime program whereby members pay $99 per year (or $10 a month) to get free two-day shipping on most items as well as access to Amazon's video platform, which includes exclusive shows such as its Emmy-award winning series Transparent. in effect, Amazon uses its music program to enhance a membership service that gives customers ease-of-use access to purchase anything under the sun that they might buy from Amazon.
Prime has fast become one of the most successful consumer-retention plans in retail with a stunning 54 million members at the end of 2015, according to Consumer Intelligence Research Partners. That translates into about 46% of all U.S. households since few households have multiple memberships.
And for owners of an Amazon Echo device, the company's popular home speaker system powered by its Alexa voice assistant, Amazon Music Unlimited will cost just 3.99 a month. The low-priced tier, however, won't allow music to be be played on more than a single Echo device at a time. Echo does function with Spotify, Pandora and iHeartRadio (IHRT) , the terrestrial radio company formerly known as Clear Channel Communications, which launched a subscription-based on-demand and radio offering last month.
Music publishers led by the Big Three -- Warner Music, Sony Corp's (SNE - Get Report) Sony Music and Vivendi's (VIV - Get Report) Universal Music Group -- along with Merlin, the consortium of some 20,000 independent music labels, are pushing for music streaming services to offset a decade-long decline in music downloads and CD sales.
The labels have held firm to a wholesale price for the service, allowing the platform operators to set the retail price. As a result, Amazon is able to charge less for certain portions of its new offering given that it generates associated revenue to Amazon Music from its Prime membership program.
Unlike Pandora, Spotify or Apple Music, Amazon's music services are meant to attract and retain members to its valuable Prime program, as well as to expand its growing Echo user base and ecosystem. The service will also be accessible through iOS and Android apps as well as on desktops.
Pandora, which has more than 85 million users to its free ad-supported radio service, is expected to launch an on-demand streaming service by the end of the year, while Spotify has more than 40 million on-demand subscribers.
And unlike its rivals, subscribers Amazon's music service will be able to access songs verbally through Echo, which costs $180, or its lower-priced speakers, Dot and Tap.
Shares of Amazon rose 0.4% to $834.09 on Wednesday to extend its 2016 advance to 23%.
Screen shot of Amazon Music Unlimited