Why Amazon Prime Music isn’t a threat (yet)

June 12, 2014, 10:00 AM UTC
Photo courtesy: David McNew—Getty Images

After months of rumor-mongering and news leaks, Amazon finally unveiled a music streaming service on Thursday.

Prime Music is available via Amazon Prime, the $99 membership package that also includes unlimited shipping and video streaming. Subscribers will be able to listen to nearly 1 million tracks from Sony, Warner Music Group and independent music labels.

What the service lacks, however, is anything to separate it from the pack of online music services competing for customers. There are rivals with newer music (most of Amazon’s songs at least 6 months old), bigger libraries (Amazon lacks deals with two major music labels) and more features. Put side-by-side, Prime Music is a grossly incomplete song inventory that pales against Spotify, Rdio and Rhapsody – rivals that boast at least 18 times the number of tracks Prime Music does. But for Amazon, it’s a work in progress: a nifty value add-on to Prime that may grow into a formidable music streaming service over the long run.

“We’re not promising a comprehensive collection,” Steve Boom, Amazon Vice President of Digital Music told Fortune while raising hope that more is on the way by saying that talks with other labels are ongoing.

Amazon has done this before. When the Kindle e-book Lending Library arrived in 2011, it did so with an anemic 5,000 e-books to borrow; when Prime Instant Video launched earlier that same year, it too featured an underwhelming 5,000-plus movies and TV shows to watch.

It’s a different story now: the Kindle Lending Library has swelled to 500,000 titles, and Prime Instant Video claims well over 40,000 movies and shows. In recent months, Prime Instant Video, in particular, has transformed from an underwhelming to a solid service that is challenging Netflix (NFLX) with a growing catalog that includes original shows and HBO programming. Despite Amazon’s track record of entering – and sometimes dominating – new markets, its video service is something few saw coming three years ago.

Amazon detractors might call the company’s overarching strategy “nefarious” given the company’s very public feud with book publisher Hachette over pricing. (Amazon has delayed shipment of many of Hachette’s titles.) Does Amazon’s quest for world domination know no bounds? There’s no denying Amazon’s brilliance from a business standpoint. But whether Amazon (AMZN) remains focused on making customers happy – as it has long claimed – is a topic open for debate.

What hasn’t changed is the way Amazon funnels its money into fast, aggressive expansion every which way possible, from a grocery delivery service to television set-top boxes. The strategy doesn’t always work. But in many cases, it does. And by the time incumbents in a market realize what’s going on and try to adapt, it’s often too late.

Just ask Barnes & Noble (BKS) and Circuit City.

Related Video: Amazon chases Apple and Spotify with Prime Music