• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

Takeaway: Whatever Amazon does, customer attrition is critical.

Editor's Note: Below is a brief, complimentary excerpt from Hedgeye Retail analysis. For more information on our services, click here.


Amazon Working on Music-Streaming Service

Streaming Music the Amazon Way - 3 12 2014 3 21 21 PM

  • "Amazon.com Inc. is hoping to offer an on-demand music-streaming service to customers of its Amazon Prime program, but it may limit how much a person can listen to any given song, according to people familiar with the matter."
     
  • "The Seattle-based company has held negotiations with record companies and music publishers seeking to license their music for the planned service, but it remains far apart from some record companies on financial terms, these people said."
     
  • "The music service is one of several new features that Amazon may add as it raises the price of Prime to as much as $119 a year."

Takeaway from Hedgeye’s Brian McGough:

Here’s the deal. Amazon’s (AMZN) world continues to revolve around its Prime service in the same way Costco’s membership-only warehouse club revolves around its membership fee. Costco loses money excluding its fee, and Amazon loses money regardless.

Perhaps a boost in customers subscribing to Prime would put Amazon solidly into the black. Because, in truth, $119/year represents a 50% increase from current levels.

But you have to keep your customers. Attrition is critical. Simple as that.

To us, this move just sounds risky.

Connect to Hedgeye.