Does streaming make Amazon Prime worth $99?

The expanded offerings help make the service attractive, even after a $20 price hike earlier this year.

By MSN Money producer Fri 2:13 PM

By Catey Hill, MarketWatch

Amazon announced Thursday that it is launching an ad-free streaming music service called Prime Music that will give Amazon Prime members free access to more than one million songs, including acts like Beyonce, Pink, Bruno Mars, Blake Shelton, Madonna, Bruce Springsteen, The Lumineers and Justin Timberlake.

Prime members will also get free access to hundreds of pre-set playlists, which include about 20-25 tracks, based on artist, music genre and mood (think: Hip-Hop for Your Commute, Playdate with Toddlers and The Heaviest Metal) or they can create their own playlists.

This news follows Amazon's announcement in March that it would raise the price, which has been set at $79 since the service began in 2005, to $99 per year. Now, for roughly a C-note, Prime members get: two-day free shipping, free access to 500,000 Kindle titles, streaming movies and TV shows and access to a million songs.

This array of services -- including the recent music addition -- is a way for Amazon to retain Prime users amidst the price hike, says James Crompton, an analyst with IBISWorld. Indeed, Prime users tend to spend more than other users: According to Consumer Intelligence Research Partners, Prime members spend an average of $1,340 per year on the site, while overall consumers spend just $968 -- so it makes sense that Amazon wants to keep Prime members happy.

But does the addition of music make the $99 price tag worth it? If you're a music buff, it may not make a ton of difference to you because you'll probably want more music than the one million songs Amazon is offering for free. Competitor Spotify, for example, offers a free service with commercials or a no-commercial service for less than $10 per month -- and it has more than 20 million songs. And even if you're not a music fanatic, it still costs $99 to get Prime, so you have to evaluate use of all the other perks it offers.

Crompton says the real value in Prime, for many people, is likely still in the shipping. For those who do a lot of shopping on Amazon -- and want fast shipping -- it's likely worth it; for those who are more occasional buyers, it may not be.

Here's a quick example to help you figure out what it means: Let's say you want two-day shipping on apparel. That will likely cost you $7.99 per shipment plus $1.99 per individual item for two-day shipping, which means that you might be better off forgoing the membership unless you planned to get many more shipments (with one item each in them) in the $35-and-under range. The math is even worse for video games and accessories, which typically cost $5.99 per shipment. Here is a list of all the Amazon shipping costs. In other words, unless you're getting multiple two-day shipments from Amazon each year, you might want to pay for shipping ala carte.

If you don't care about speed, Amazon Prime also might not make sense for you. Consumers without a Prime membership can sometimes get free shipping if they spend $35 (excluding gift wrap and taxes) or more on eligible products, though that's typically not two-day shipping. Plus, shipping rates on individual items on Amazon are often quite reasonable. Books, for example, cost $3 per shipment plus an additional $0.99 for each individual book for standard shipping (so a shipment with one book in it would cost $3.99) and $10.99 per shipment plus $1.99 for each individual book for two-day shipping.

Of course, if a Prime membership would allow you to cancel your Netflix or Hulu Plus (since Amazon Prime members get free streaming TV and movies) where prices range from $6.99 to $19.99 per month; Spotify or other streaming music library (since Prime members now get one million free songs), where prices hover around $4 to $10 per month; and/or allow you to buy fewer books (since Prime members get 500,000 free titles, it might be worth it, saving you $100 or more dollars in a year when combined with all the free shipping. But here's the thing: Sometimes, users -- especially music, book, TV or movie buffs -- find that the Amazon movie/TV/music/book libraries aren't as great as other options, so they end up shelling money out anyway.

Bottom line: If you buy a lot of items that are under $35 -- or want two-day shipping on multiple items -- the Amazon Prime membership, even at $99, is probably still a good deal. And if it allows you to ditch your streaming TV/movie or music service, even better.