Amazon's Big Bets on Music, Twitch, and Podcasts

0:04I'm Dan Runcie. Welcome to Trapital, where you're going to hear a conversation that we had on stage at the summit about the competition for your attention. We're joined by Steve Boom, who's the VP of audio, Twitch and games at Amazon. And that audio piece includes music, audible and wondering. So when it comes to the future of entertainment and how all these products intersect, Steve is one of the best people to talk to. He understands the trade-offs with growth, where the market looks right now, and some of the dynamics that creators themselves may wrestle with, such as exclusivity, distribution, money, the broader goals of what these types of partnerships can do for their business, and more.

0:46But we also had a real conversation about growth, particularly with streaming, what that looks like for Amazon and the industry overall. Thank you again to Steve for joining us. Really enjoyed this conversation, and I hope you do as well. Here's my talk with Steve Boom.

1:04This episode of Trapital is presented by Chartmetrics' new AI-powered tool called Flow. And instead of me telling you about Flow, let me give you an example so you can see how powerful this is. I asked Flow this prompt here. The artist, Ash, is blowing up. I want you to do some exact attribution to figure out which of her social content pieces has been delivering the most growth in terms of stream counts and engagement. Well, it took two minutes for Flo to give me a specific answers with charts and everything, but I'll give you a snippet here. What the content actually did. Two things happened in sequence.

1:41First her own account posted the song's live debut from her hometown San Jose on August 8th, which pulled 14.2 million views and 2.9 million likes, classified by Chartmetric as a performance slash tour live show post. That was followed the next day by a straight promotional clip, quote, anyway, stream stopped the wedding, end quote, at 14.4 million views and 2 million likes. And then on August 13th, a community engagement clip aimed at daughters to think of their mothers at 8.1 million views. So you can get both the qualitative in terms of understanding which types of content do resonate, and also seeing the specific ones.

2:20Ashes Stop the Wedding is a very fun song, but it's always helpful to see the attribution, and this is just one of the examples of what you can do with Flow. So check it out. When you get a chance, you can go to flow.sharpmetric.com slash trapital, or check the link in our show notes.

2:42I was told that that was not only your walkout song. This is a family walkout song. I was pretty much. Yeah, it's a walkout song and a hype song all at the same time. Like when the kids came out for their high school games and stuff. Here comes the book. Driving them to soccer practice or whatever when they need to get hyped up. Well, Steve, I welcome you joining us. And you oversee a wide gamut of products at Amazon. You have Amazon Music, Audible, Switch, Wondery, Games as well. And of course, each of those has their own North Star. But in some ways, I wonder, do you think about a ceiling that they may have just given the competition they may have with each other for the same hours in the day for consumers that they can only watch or listen to so much?

3:25I don't really think about a ceiling. I also think you can look at different types of entertainment in different buckets. I think audio kind of enjoys a privileged position. So whether that be music, audio books, or podcasting, in that audio, unlike video, doesn't command your full attention. Audio is typically listened to while you're doing something else. So as long as you're doing other things, music is capped by that. It's not capped by, is that person scrolling TikTok? You're not scrolling TikTok, I hope, when you're driving your car, for example, right? But you are listening to podcasts, music, audiobooks.

4:03The ceiling is much higher, and I think there's probably multiple ceilings. But there's no doubt that once you get outside of that, and it's my primary focused activity, every service is competing for the customer's attention. Short form video obviously exploded a few years ago. I have three Gen Z kids that are all 19 to 24, and you can see the amount of time it really takes from them. That being said, they want to get back to other entertainment. I see my son going playing video games because it's a way of socializing. I see my daughters doing whatever else they do, whether reading books or watching television or YouTube videos or whatever, Twitch, all those things.

4:43And I want to dig into each of those, but maybe we should start with podcasting specifically, because you all, of course, have Wondery there. And earlier this year, you had announced a partnership with Oprah. There's some exclusivity there. There is some other aspects to it as well. And I'm curious how you look at those types of partnerships, because there's been plenty of scrutiny about celebrity podcast deals. But what made you say with this one? Yes, let's do this. Well, just start with it's Oprah Winfrey and she is the OG creator. Literally, I think the term hadn't been coined, but that's who she is.

5:18We're very selective in who we work with. We work with people who we think want to build more than just a podcast, but actually build a business. And Amazon can help them do that. And the case of Oprah, for example, it's distribution and monetization of her podcast, but it's also working with her on Oprah's favorite things, Oprah's book club, Amazon's an important player in books, obviously. And we can do more for her and activate more of her business than just a regular pod. I think it's important our approach to pods as well, which is different than some of the stuff you're seeing out in the market is that we're in favor of broad distribution.

5:59So all of our partnerships, they are non-exclusive in the sense that the podcasts are available anywhere you get podcasts. And we do that very deliberately because what does a creator need? a creator needs reach at amazon we always work from the customer start work backwards from the customer and if you're a creator going exclusive is not generally a very good idea because you go exclusive to one platform eventually that deal expires and when that deal expires then you have to move your audience somewhere else and we think about creators very differently in that regard than maybe talent. Talent being people who work on something where the story is the actual piece of intellectual property versus you are the intellectual property.

6:48And you need to continue to have your audience wherever you go. And music figured this out many years ago. Musicians are creators and musicians don't want to be exclusive. They want to be broadly accessible because their business is much bigger. Their business is about them and they want to have as big an audience as possible. If you're an actor on Game of Thrones, you may be the star of the show, but the value is in the IP itself. And once the show is over, you go on to something else. And it's a new audience because it's an entirely new story. You have to build a new audience. That's not the same with a creator.

7:22Their audience follows them wherever they go. But you don't want to lose them by alienating them by going exclusive one place and then having to reacquire them later. So if you're not restricting them and you're making sure that exclusivity is not part of the deals, how do you make sure that it's beneficial for Amazon economics wise? Well, we work with them on monetization and we're really, really good. Turns out at monetizing creator podcasts, whether it's because we're experienced in Twitch or just our, our, our, our really good ad sales team. And obviously we take a share of that, but we also work on doing some unique things for Amazon to deliver unique value.

7:59It could be early access to an episode. It could be bonus content, things like that, that those might be available only on our platform. But the core show is going to be available everywhere. That makes sense. So let's shift gears a bit to music. And in many ways, music was the product that you first overseed at Amazon before you oversaw some of the others. You helped lead the initial launch for both Amazon Prime Music and also Amazon Music Unlimited. But recently, there's been a lot more reports. People have been saying that Amazon Music hasn't been growing in terms of the subscribers, whether that's data from Midio or even major label executives that have said, oh, the service isn't growing anymore, the market share.

8:41But we haven't heard from you yet. So I wanted to get your thoughts. What's really going on? Are you all still growing subscribers? Yeah. Yeah, we're still growing both in the premium and in the free tiers. We're ahead of plan for this year. In Amazon Music Unlimited? Yeah. Yeah. Yeah. What's fair to say is that growth has slowed in all of the established countries. So this is not a unique to Amazon issue. Music streaming went through an S-curve like a lot of new services do. And in the bigger countries, the S-curve has flattened out tremendously. When you look at global numbers, which a lot of these reports are, the truth is that we're not in a lot of the countries that are driving the new growth.

9:22It's a lot of emerging countries. And Amazon just hasn't been present in those countries. An example of where we're changing that is we really just launched in India three months ago and at three tiers, free prime and AMU. And we've got millions of people using the service already. So yeah, we're still growing. We're still very happy with where we are. And do you think that part of the reason that maybe you all aren't growing as much in emerging markets, you mentioned Amazon overall as part of that because of the distribution of Alexa products or the distribution of prime subscribers themselves and just how that for many years was a seamless on RAM to add AMU.

10:00That's totally fair. Yeah. I mean, the music services have been built largely through distribution, right? We all have the same catalog of music. And so when that happens, you know, it's like, how do you acquire customers? Every service has its own distribution channel. Our distribution channels are Amazon retail, Amazon prime, Alexa devices. Those are the primary and include increasingly television-based devices as well. Those are our distribution channels. I'm not going to speak to the other streaming services channels that are kind of obvious. And so, yeah, if in Malaysia, let's take as an example, Indonesia, if those channels don't exist or aren't as big, then, you know, it's not surprising.

10:45We haven't even launched Amazon Music there as a result. So for you all, especially since you only launched in India a few months ago, and maybe some of the other competitors had launched earlier. Do you feel like the rationale for why you launch a particular market, it's not just, oh, this competitor's here, we need to go there? Or are you waiting for success? We are different, right? And we kind of swim in a different lane and we're comfortable with that. And the way we measure our success, I mean, there's a lot of similarity, I suspect, with other services. We'll look at subscriber growth. We'll look at churn.

11:21We'll look at hours per customer. or we look at, you know, are we helping break artists and break albums? Are we helping develop artists and fan relationships? Whatever metrics some of the other services may look at, we're obviously looking at those, but we look at other stuff too. Amazon Music sits at the nexus of, is a really important part, is at the nexus of two big parts of Amazon that you've already called out. One is Prime and one are Echo devices or Alexa devices. And so we look at how Amazon Music is contributing to those strategic priorities of Amazon's success. And so that's another vector that we look at.

12:01We're also the largest, by far, at this point, retail or physical music in the world. That's something that we look at. We look at how we can connect different experiences across Amazon, whether it's on our Echo devices, our Fire TV devices, inside of Prime Video, on Twitch. We look at the synergies across these things and there's different ways that we measure value.

12:29Let's take a break for our chart metrics stat of the week, which is 1 ,341. That is the number of days that Mr. Brightside by The Killers has been on Amazon Music's Top Tracks playlist. As of October 22nd, it is currently the number 6 spot and the only song in the top 10 that was made more than 10 years ago, let alone more than 20 years ago. The song came out in 2004, but still it shows the longevity of that song. It is truly a one of one. I was just talking to my wife the other day. She asked me if this song was the Sweet Caroline or the Living on a Prayer for the Millennial Generation. I think there are a number of competitors out there.

13:11Google Dolls Iris could be another one. But Mr. Brightside Killers continues to show longevity and staying power, especially here on Amazon Music. Let's get back to the episode. Do you feel any pressure, though, even though, as you mentioned, you're playing a slightly different game? is there any pressure whether it's internal and amazon or even with the major record labels that are eager to grow grow grow and they're trying to push their growth for their own goals to be like hey steve or hey ryan or the folks that are working closely on this how can you help us grow to make sure that you're getting this product to the people look we're always working with the labels we've great relationships with them we're always working with artists on ways to help grow our business and how we can help grow their business.

13:56It is a they grow, we grow, they grow, you know, kind of situation, obviously. Yeah, so we have a lot of those conversations. And obviously every business at Amazon, we run our own P &L and we have to present our business plan every year to our CEO and he expects us to be doing well. I'm not going to buy into the characterization of sort of, are we feeling a lot of pressure? I don't think it's any different than anyone else. We first launched the free music tier X number of years ago when Alexa devices shifted from being 95 % of the buyers were Prime members, because it's kind of this early adopter, I love Amazon product, to a mass audience, hugely successful product.

14:41we saw an increasing number of customers, non-Prime members or non-Prime customers buying these devices. And we wanted them to have a great music experience. Makes sense. It's a speaker. First thing, what you want to do when you take a box is listen to music. And that free tier has been a really good funnel into AMU. That free tier exists also on every other device. And where we've really seen that helping our growth has been in some of the smaller countries or somewhere like India, where the premium market's developing, but not as developed. We've seen whether it's there, Spain, Italy, Mexico, Brazil, we've seen huge growth in the free tier, which ultimately does lead to premium growth at the same time.

15:25And we've heard a few years ago, maybe it was Rob Stringer from Sony Music had said that, yeah, they wanted to see an ad supported tier. They actually wanted to see that also be a price tier, not necessarily a free tier. And there didn't seem to be as much a movement on that since he made those comments. But what's your take on that in terms of an ad supported tier? Yeah, slightly first. I would say that I would look at that on a country by country basis. I think there are some countries where that could make a lot of sense. And those would be countries where the S curve is flattened out somewhat.

15:57Right. And so do you want the ad supported, the free tier, the ad supported tier just to be a destination or do you want it to be a stepping stone? I think those countries, it might make sense to do something like that. I think in newer emerging countries, the playbook is clear. You have to develop the proclivity to pay. And the best way to do this, get people into free tier and then build extra value for them to upgrade to. And then their friends find out about it and et cetera, et cetera. If there were a change like that, I would be interested to look at it in certain countries, but I wouldn't do it in India as a great example.

16:30I think that would be crazy. Or the United States, for instance. It could be an interesting place to explore it. Yeah. Because I think with a country like the United States, the other thing that gets brought up is the pricing for the premium product itself. And a lot of the major labels feel like, hey, streaming should be priced higher. How do you feel about that? I think music is the best value in streaming media by far. I mean, if you think about the value proposition, you're paying now, is it$11.99 a month? you have access to all the world's music podcasts now audiobooks i mean if amazon music unlimited you you have full access to audible which is by far the best audiobook service and catalog in the world by i mean by leaps and bounds that is an unbelievable value um but the the market dynamics are very different than streaming video because we all share the same music catalog pricing works differently.

17:30So do I think there's more room to, for people to pay more? I don't know any other service that's so fundamental to our daily life as music. And it's, you know, you use it all the time. 1199 is an insane value or the family plan or whatever, 1999 or whatever it is now, it's an insane value. Well, if the major labels are saying that it's price too low, and you also agree it's price too low, why not say, okay, AMU should be 1699. Okay. Well, look, we've been increasing price on a regular cadence. So have the other streamers. It's not something you do all at once. And, you know, the price has increased a couple times in the last few years.

18:09And I expect over time it will increase again. But same time, we want to continue to grow the market. And there is price sensitivity. There's subscription fatigue. There's all these things happening. We're always measuring churn. What happens when you raise the price? Is the churn higher or lower than you expected? How frequently do you want to raise price? Are we continuing to add more value to our customers? We don't just raise price without giving them more for their money as well. So I think it's just a process. We'll get there. And I'm glad you mentioned video as well, because we've all seen the reports.

18:42Everyone always compares, oh, look at how much Netflix has raised the price. And while I get that, it's also so different in many ways, because one, as you mentioned, the product is not a commodity where it is truly differentiated, but two, there isn't this alternative of a free ad supported service that can offer that same. Yeah, that's a dynamic and music. That's definitely what you say is true. There have always been a lot of free alternative ways to listen to music. That's not new. I mean, it started with the radio, right? And there's this thing, there's a place you can go on the internet to watch a lot of videos for free.

19:17Even if all the people have streamers that have a free, an ad supported, free ad supported music service were to put a price. A lot of people would just go over to that video first service and watch and listen there. So it, the industry needs to figure out, you can't do it one at a time when there are all these other free alternatives out there. And, and let's be honest, the industry itself is of mixed minds because at times it's like, we want to raise revenue. On the other hand, artists want promotion. Artists want reach. I Many artists probably are happy that their music is available on an ad supported basis, whether it's in video form or audio form, because that ultimately helps drive their bigger business of which recorded music is just a part.

20:04Right. Their touring business, their merch business, their publishing, all that stuff grows as their audience grows. And it doesn't all happen behind a paywall. Which is so much of the podcast point that you mentioned earlier with that. And mentioning video services, we can switch gears a bit and talk about Twitch. I think a lot of people thought of it as live streaming gaming primarily for that audience. But in recent years, there's been partnerships with FIFA, with the World Cup and others. And it does seem as if that is building towards a true competitor into the video space beyond just the live streaming space itself in terms of where Twitch could potentially be based on some of the traffic.

20:41Twitch is such an interesting business. What we love about it at Amazon is it's this one-of-one kind of thing. Who doesn't love a one-of-one kind of business? Obviously, its origins, for those who are familiar with it, it started in live streaming of people playing video games. That's still a huge percentage of what happens on Twitch, but it's evolved significantly over the years. And we've really seen in the last, let's call it 18 to 24 months, an explosive growth both on Twitch and in the zeitgeist of live streaming in other areas. And it could be people doing in real life, just chatting, sports related things, music.

21:21We're seeing a lot of musicians on Twitch. In fact, there was a cover of Billboard or Rolling Stone a year ago-ish. It's like, how do you break a new hip hop song started on Twitch, right? And they gave a whole list of songs that have started that way because artists are out there interacting with their community. What makes Twitch unique is a place for live, but it's also a place for community. There's no other site that combines those things in the same way. And the relationships that streamers build with their audience and the audience with the streamer and with other people in the community is really quite remarkable.

21:56Twitch is the only major service like that where the majority of revenue is not ads. The majority of revenue is viewers paying to support streamers and getting value in return. And it's not some sort of like altruism tip jar. You know, they're getting real value through subscriptions and other things. And I find that that's because of the strong community dynamic and the identity that you build. Live streaming is just going to keep growing. I think in an era of AI, the authenticity that comes with live is unmatched. And we're increasingly seeing actors, musicians, athletes, and others come to us and say, I'm starting to see live streaming as the kind of the tip of the spear, if you will.

22:43It's like, I want to do my stream on Twitch and then I can take that and I can cut it up into long form VOD, mid form VOD, short form VOD, and clips distribute them. Yes. On Twitch, but also across all the other streaming services, but it's that live authenticity that gives them incredible moments to share across all these other platforms too. I do have a few follow-ups on Twitch, but I also do want to save some time for Audible. Sure. You praised it earlier saying it is the best place for audiobooks that there is. But I want to talk specifically about some of the international work that exists specifically with Audible because audiobooks so far have mostly been English language.

23:30And I think we've seen with music in the past 10, 15 years, what started as a dominant Western culture thing and how we see that explored with globalization and each country in their own language. And you saw the explosion of music and worldwide. Can you talk a bit more about Audible? Because I think something similar could be happening there in that space. Yeah. I mean, the first thing I would just want to congratulate you for not saying the word AI yet in this entire, which is like the first time in a long time, but I'm going to say it now. Because when you talk about audiobooks, AI is this incredible facilitator and tool.

24:05Like you said, the overwhelming majority of audiobooks in the world are in English. Spanish is second and German is third and everything else is really, really distant, a long tail. And part of the problem is it's not cheap to make an audiobook. You have to hire a narrator, voice actors, whatever you want to say, and it takes time and production value. So, but what we can do with AI is using synthetic voices, speech to speech translation, we can actually get to the place where the catalogs are much broader. And so we have this vision and audible of every book is an audio book in every language.

24:44And AI is an incredible facilitator of that. The models are just unbelievable. And these are models for long form voice or long form reading. It's very different than, you know, listening to Alexa talk to you, uh, you know, for a brief interlude, it's actually someone reading a book to you out loud. It's a very different voice model. I think we're going to see an explosion of, of this format around the world. We know it's a phenomenal format and we're going to see the format evolve to become much more immersive. And we talked about that as well. And, um, you're going to see audible and others i think continue to transform what an audiobook is so that it's much more immersive audio entertainment and it lives in its own swim lane not as we should already does but even more distinct from the book that you might read on your kindle or that you might read in physical form and do the economics play out with that with both the potential international growth for audible and then also what you would make not only for you all as running the PNL, but also for the authors.

25:48It's phenomenal for the authors. Yeah. Anytime you can get a bigger audience and more people can access your intellectual property, you know, that's a good thing, right? So yeah, if we can build new countries at Audible and have a good subscriber base there, I think that's great for everybody. Well, we'd love to continue, but we'll have to pause there. But Steve, I appreciate you making time for joining us. My pleasure to be here. Thank you very much. Steve Vroom. And that is a wrap. Thank you again to Steve for joining us. Thank you to G and Eric, our audio and video producers, for everything you did to help make this episode possible.

26:27Thank you to Sean T. Smith for capturing the video and audio at the summit. Thank you again to all of our sponsors. And most importantly, thank you for listening. If there's one person you know that would really enjoy Trapital and get a lot out of it, send them a link to the show. Word of mouth is still the best way to grow. and if you're not already, make sure you're following us. So tap that follow button on Spotify, Apple, wherever you get your podcasts. Leave a review or comment if you haven't already. That helps the algorithm do its thing and make sure that Trapital reaches the right people.

26:57Thanks again. Talk to you next time.