Amazon might have grabbed a first-mover advantage by beating Apple and other companies to the punch with a web-based music storage and streaming service — but it wasn’t enough to floor investors in the same way companies like Apple have done in the past with these kinds of announcements.
Investor reaction to a dramatic change in company activity can sometimes be an indicator of how successful a new product might be. For example, when Apple announced the iPhone, its shares jumped around 8.3 percent. Amazon’s announcement led to a modest 3.1 percent bump in the company’s share prices. Despite being the first in the field, it wasn’t able to pull off an Apple.
The new service looks like it will face some stiff competition from a few companies. Google is rumored to be testing its cloud music service internally. Apple is also believed to be working on a cloud music service after picking up Lala.com. Spotify, an extremely popular cloud music service in Europe with more than 1 million subscribers, is planning on moving into the U.S. market. Sony also announced its music service will be accessible through the Internet.
The announcement did not spook Amazon’s competitors. Shares of Apple were about flat when trading ended Tuesday, and U.S.-traded shares of Sony edged up 0.8 percent to $31.91. Trading activity in both companies after the bell was also limited. The markets were up across the board after a less-than-harsh report from The Conference Board concerning consumer confidence in the economy — which also likely contributed to gains in both companies.
That’s because the new music service wasn’t that significant of an innovation, nor would it advance the field enough to dramatically alter the music industry, said Mark Mulligan, an analyst with market research firm Forrester. That kind of functionality — the ability to access music and other content from any device — has basically become a requirement in the smartphone and tablet industry, he said.
Cloud Player allows users to upload their music and play it on a PC, Mac or any Android device. The music playback is not restricted to a single computer. The first 5 gigabytes of storage are free with an annual fee for additional space. Anyone who buys an album from Amazon gets an additional 20 gigabytes of storage for a year. The service works with newer Internet Explorer browsers, along with Safari, Firefox and Chrome. It does not work with the Opera browser.
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