Wednesday, May 16, 2007

Amazon to start selling digital music (MSNBC)

By Joshua Chaffin and Aline van Duyn in New York

Amazon on Wednesday moved to shake up the online music business by setting up a direct rival to Apple's iTunes which will sell tracks without copyright protection.

The online retailer's decision to enter the music market could bolster the fortunes of the largest record companies. They have been desperate for an alternative to iTunes in order to gain more leverage in negotiations over pricing and other issues for the burgeoning digital market – particularly at a time when sales of compact discs are plunging.

However, their excitement about Amazon's new service, which will debut later this year, may be tempered by its decision to sell tracks for MP3s without the so-called digital rights management, which prevents consumers from freely copying and transfer their music among a variety of devices – from iPods to personal computers and compact discs.

"Our MP3-only strategy means all the music that customers buy on Amazon is always DRM-free and plays on any device," said Jeff Bezos, Amazon.com's chief executive.

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So far, EMI is the only major record company to endorse such an approach. Six weeks ago, it announced an agreement with Apple to sell its catalogue on iTunes without copyright protection. It has also signed on to the Amazon service, along with thousands of smaller labels.

Its major competitors – Universal Music, Sony-BMG and Warner Music – are testing such an approach, which Apple's chief executive, Steve Jobs, has advocated as a way to grow the digital music market. However, they are still concerned that selling in MP3 could lead to a spike in piracy or cut into their burgeoning sale of music to mobile phone users. Several said on Wednesday that they had no immediate plans to sign with Amazon.

However, David Card, an analyst at Jupiter Research, predicted that Amazon's move could ratchet up the pressure for other labels to follow EMI's lead. "Getting another big, big player to endorse DRM-free is a big deal," Mr Card said.

Amazon, the pioneering online retailer, sells CDs online and has also begun to offer digital versions of films and videos. It did not release pricing information for the new music service, except to say that it would be "competitive."

Itunes has maintained its roughly 80 per cent share of the legal online music market in spite of competition from a variety of companies, including Microsoft, which last year released its Zune player.

Barney Wragg, EMI's top digital executive, predicted that Amazon's participation would "take the whole digital music business onto the next level" and give consumers greater choice.

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