Amazon, the Spotify killer

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Good morning! How many crypto commercials did you count during the Super Bowl? We lost count after four, but Coinbase definitely won the whole thing with its QR code ad. And the crypto ad bonanza is only just beginning.

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I’m David Pierce, and I’m currently tearing through “The Always Sunny Podcast,” which is almost as much fun as the TV show.

Alexa, play podcasts

In the last couple of weeks, a lot of people have found themselves Googling things like "best music service not Spotify." Things like #deletespotify have trended repeatedly. All of Spotify's competitors should send Joe Rogan a gift basket, really. But if users do leave Spotify, where will they go?

It's easy to see streaming as a two-horse race. There's Spotify and there's Apple Music. And then, way down below, there's Tidal and Deezer and Pandora and SoundCloud and YouTube Music and SiriusXM and countless others.

But Amazon might be the company to watch in the audio wars. For starters, it's already bigger than you think:

Amazon Music owns 13% of the music-streaming market, according to Midia Research. That puts it in third, behind Spotify (31%) and Apple (15%). But Amazon is growing faster than either one. YouTube Music is actually the fastest-growing service on the market, but it's not quite as competitive as Amazon Music yet.
Amazon has also been making a string of deals to bring podcasts to the platform. Just last week, it made a deal with Guy Raz to publish episodes of "How I Built This" on Amazon a week before they're available elsewhere. It made similar deals with podcasts like "SmartLess" and "My Favorite Murder.”
It's interested in buying Audioboom, Sky News reported this weekend. Audioboom makes shows like "F1: Beyond the Grid" and "Dark History." And, of course, it paid a reported $300 million for Wondery in 2020 and acquired the hosting and advertising platform Art19 last year.
Amazon spent a total of $13 billion on content last year, and while most of that is video, it's up $2 billion from its 2020 spend. Amazon's serious about being a media company in general.

Amazon has a big advantage here: It doesn't really need to make money from audio. As Spotify and others are finding, the economics of the audio business are rough and not getting easier. But Amazon seems to treat Amazon Music like it does Prime Video: a good service on its own, but a killer one as part of a Prime subscription.

Audio suits a lot of Amazon's needs, actually:

Amazon Music integration is a reason people buy Alexa speakers, and music in general is the main reason people use them. And like Microsoft bundling Teams to destroy Slack, Amazon can bundle Music with Alexa and make inroads practically anywhere. Even Spotify's Daniel Ek admitted that Spotify was "not that differentiated" and was struggling to make deals with hardware partners. Alexa will help Amazon get a lot of those deals, which become wins for Amazon Music.
Amazon's also a fast-growing advertising business, and audio ads are a fast-growing business.
And, of course, as the creator economy continues to boom, Amazon wants musicians and podcasters to use its tools to sell stuff, like Twitch streamers already do. It’s already experimenting with this, like in December’s Kanye West concert where viewers could preorder his merch right through the Amazon Music app.

And then there's Audible. Audible is a wholly separate thing from Amazon Music, which obviously started with audiobooks but more recently has added podcasts to the platform and funded its own "Audible Originals," which are just, well, podcasts. It wouldn't take much to combine Audible with Music, and maybe even Prime Video, for a pretty powerful media subscription.

The big question here: Is audio a business or a feature? Spotify, Clubhouse and others are betting it's a business. Apple's betting it’s a feature, better off rolled into something like an Apple One subscription, more of a marketing engine than a profitable enterprise on its own. And Amazon's clearly in the feature camp as well: Music can bring people into its other services, get people inside of Amazon's universe and put its tools a click or voice command away anytime you have headphones on.

Streaming execs have always told me that people don't really switch music services. Your service gets to know you, the recommendations get better, you understand the interface, you build a library and the switching costs get too high given that it's all the same music everywhere you go. (I’ve been on Spotify for a decade for this exact reason.) That's why moments like the Rogan controversy matter so much: They make people shop again. And Amazon's surely hoping millions of Prime subscribers discover they already have access to a pretty good music service.

— David Pierce (email | twitter)

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Call it crypto, and they will come

Coinbase, Crypto.com and others used Super Bowl ad spots to bring their crypto messaging to the masses. Coinbase certainly got its message across with a bouncing QR code commercial that captured everyone's attention; the code linked to a promotional page on Coinbase's site. That is, until the site crashed under the pressure of so many people. The company had to throttle traffic for a few minutes to get everything back up and running.

Was paying $6.5 million for a commercial whose popularity crashed the company's site worth it? It would seem so: Coinbase would have to convert just 0.04% of viewers to break even, according to some math.