Why Amazon's 'Me-Too' Music Service Is A-OK

Amason.com, Inc. (NASDAQ: AMZN) has updated its Prime Music service with ad-free radio stations for iOS users. Experts say it's a "me-too" offer that follows the lead of Pandora Media Inc (NYSE: P) and Apple Inc.'s (NASDAQ: AAPL) iTunes Radio, but investors shouldn't be worried.

"Me-too for Amazon is actually okay as long as you put into your spreadsheet how many Amazon Prime customers they can pull over," Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told Benzinga. "They're just going where the content is. They sold a ton of music CDs. They got a little off track on digital music with Apple's dominance in that space, but they're going where the puck is definitely headed."

Dan Miller, senior analyst and founder of Opus Research, said this is a "brick in the wall strategy."

"Every action Amazon takes is designed to leverage everything that came before with their long-standing customers," Miller told Benzinga. "If they perceive (or if their analytics show) that there's some value to fleshing out the music library…that's very consistent with what they're doing."

Prime Music might be written off by some investors, but Miller sees it as a part of Amazon's overall goal.

"Amazon, if and when it gets its way, they're going to predict what you're going to buy, know what you own, [and] select the channel that's the best to deliver it more quickly," he said. "Everything they do -- whether it's streaming or delivery of electronic products, physical products -- that's where it all fits."

Related Link: This Analyst Says Amazon Prime Will Reach 45 Million Subscribers In 2015

Credit Cards, Secrets And More

Moorhead said that Amazon has one distinct advantage over its music-only competitors.

"[Amazon has] this massive base -- unlike any of these music subscription services -- who they have credit cards from, and people are buying a lot from them," he said.

Investors don't know exactly how many people subscribe to Prime, however. Analysts have provided their best guesses, but Amazon has yet to reveal any specifics.

"Amazon wants to keep that secret because they don't want to be held to it in the future," said Moorhead. "I think it fluctuates, but also financial analysts will be on them trying to get that number to be able to buy the stock, sell the stock, short the stock. I don't think the Amazon Prime number varies widely, but I don't think it's wise for them to give quarterly updates on the number."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.