Amazon to open music store

Online digital site to sell songs free of anti-piracy software

May 17, 2007|By Joseph Menn and Alana Semuels | Joseph Menn and Alana Semuels,Los Angeles Times

Amazon is finally taking on Apple.

The Seattle-based online retail powerhouse said yesterday that it would open a digital music store with a consumer-friendly twist that, Amazon hopes, will give Apple's iTunes a run for its money.

The difference: Customers can do anything they want with the songs they buy.

Dealing a blow to a pillar of the recording industry's anti-piracy efforts, Inc. said none of the millions of tracks it planned to sell would be encumbered by software that restricts copying. That means people can play the songs on iPods or any other music player and burn them onto CDs an unlimited number of times.

Plus, Amazon already has millions of online shoppers and sophisticated software that recommends products based on customer tastes.

"There's much more potential for Amazon to be a competitor than anyone else," said Gartner Inc. analyst Mike McGuire. "They did write the book on e-commerce."

The store, which is expected to go live as early as this fall, features songs from music giant EMI Group and thousands of smaller record labels - but none of the other majors so far.

EMI, the world's third-biggest record label, broke with its peers in April and said it would soon begin offering unshackled songs from Norah Jones, Coldplay and other top artists for sale through iTunes. It did the same with Amazon yesterday.

Amazon's vow to not sell music whose use is limited by so-called digital rights management, or DRM, software deals a big blow to the major record labels.

The record companies have tried to keep electronic versions of songs in a format that's difficult to illegally share.

Music industry insiders said privately that Amazon's influence might eventually force them to give up their effort to use technology to restrict what consumers do with the music they buy.

"The other labels will capitulate," said Peter Fader, a marketing professor at the University of Pennsylvania's Wharton School.

EMI's three biggest rivals - Universal Music Group, Sony BMG Music Entertainment and Warner Music Group - offered no public response yesterday to the Amazon announcement.

Amazon said its store would feature music from 12,000 record labels, but it didn't name any besides EMI. The company also declined to say how much it would charge for each song. Apple sells most tracks for 99 cents, and this month will start selling DRM-free songs for $1.29 apiece.

No date was set for the virtual store's opening, beyond "later this year." Music industry sources said they didn't expect it before September.

Amazon' prowess in selling CDs online helped it become the fourth-biggest U.S. retailer in 2006, trailing only Wal-Mart Stores Inc., Best Buy Co. and Target Corp. according to research firm NPD Group. But Apple, which sells digital downloads, is in fifth place and closing fast.

Amazon, led by Chief Executive Officer Jeffrey P. Bezos, has been plotting an entry into the digital-music market for years. At times, it has pitched the labels on selling copy-restricted music. At other times, Amazon weighed selling its own brand of portable music player and selling music that would only play on it.

"There's an increasing realization among record companies that DRM-free is the way forward," said Bill Carr, Amazon's executive vice president of digital media. "Part of our goal is to drive that trend."

Copy-prevention software has irritated music buyers who want to move songs easily from a computer to other devices. Music they buy from other online stores won't play on the iPod, and iTunes music won't work on rivals' music players.

Amazon, which launched a digital movie download store in September, is trying to lessen its reliance on selling physical goods. Sales of CDs, books, DVDs and other media generated nearly 70 percent of Amazon's $10.7 billion in 2006 revenue. But Amazon could face a tough road without music from the other big record labels.

"The question is whether anyone can make any kind of a dent on iTunes," said Martin Pyykkonen, an analyst with Global Crown Capital.

Joseph Menn and Alana Semuels write for the Los Angeles Times.

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