In just 30 days, Amazon MP3 may be the No. 3 online music store

amazonmp3 logoThe potent combination of DRM-free music, low cost, and the fact that what you buy plays on your iPod has made Amazon MP3 (see our review) the No. 3 online music store in just one month.

Hypebot, a music, technology, and new music business blog, reports that a number of record labels are saying privately that they believe Amazon MP3 has climbed past Rhapsody, Wal-Mart, and Napster to become the No. 3 retailer in downloaded sales of their music.

Amazon trails market leader iTunes and eMusic, although Hypebot speculates that Amazon MP3 could slip past eMusic to finish the year as the No. 2 online music retailer for some labels. The measurement here is dollars paid, not the number of tracks downloaded.

Last week, Amazon stepped up the pressure on iTunes, eMusic and the other online music retailers by telling affiliates it will pay a 20 percent retail commission for MP3 sales through Dec. 31, according to the Silicon Valley Insider. The rate will drop to 10 percent in January, which is still 5 percent more than what iTunes pays its affiliates.

amazonmp3 new and notable 400 px“Amazon certainly isn’t making money on digital music in the short term,” writes Dan Frommer for the Insider. “For now, it simply needs to get traction against Apple’s near monopoly of the digital music business, and this seems like a clever way to aid that effort.”

Amazon MP3 has certainly gained its footing, and it’s already affecting all online music retailers, including iTunes. From the start, Amazon has sold music free of digital rights management for 89 cents to 99 cents a song. iTunes also sells DRM-free music, known as iTunes Plus, but for $1.29 a song. Apple has since lowered the price of its DRM-free music to 99 cents.

With its early success and business acumen, Amazon MP3 is no doubt a viable alternative to iTunes and will give the major labels leverage when renegotiating contracts with Apple. Apple CEO Steve Jobs has stood fast on the 99-cents-per-track cost, while the record labels have been pushing hard for variable pricing.

Amazon MP3’s success, too, points to the effectiveness of DRM-free music. Under digital rights management, songs are tied to specific players. Music downloaded from Rhapsody cannot be played on an iPod without re-encoding it, a hassle for most people. Likewise, DRM’d songs purchased on iTunes cannot be played on a Zune or iRiver MP3 player.

Now with Amazon MP3, consumers can download DRM-free music, at a low cost, and play it on any player they choose, including iPods. It’s no wonder that Amazon is the No. 3 online music retailer after just 30 days in business.

last100 is edited by Steve O'Hear. Aside from founding last100, Steve is co-founder and CEO of Beepl and a freelance journalist who has written for numerous publications, including TechCrunch, The Guardian, ZDNet, ReadWriteWeb and Macworld, and also wrote and directed the Silicon Valley documentary, In Search of the Valley. See his full profile and disclosure of his industry affiliations.

8 Responses to “In just 30 days, Amazon MP3 may be the No. 3 online music store”

  1. mark says:

    “Likewise, songs purchased on iTunes cannot be played on a Zune or iRiver MP3 player.”

    Not true. Only “songs with DRM purchased on iTunes” have that condition. There are more DRM-free songs at the iTunes Store than at AmazonMP3.

  2. tom says:

    I just wish they’d open up a similar store for Canada…a day after it opened I was able to get one track, but a few days later it said they couldn’t sell to me (IP based I presume) based on my geographic location. Bummer.

  3. Steve O'Hear (editor) says:

    @mark

    the post has been updated for clarity. Thanks.

  4. Hank Williams says:

    Actually amazon’s succes does not prove the significance of DRM free music. The truth about DRM free music has been demonstrated with apple’s DRM free stuff with EMI. As should be obvious, but isnt to DRM tech insiders, civilians dont care about DRM. They will not pay more for it they will not change their habits for it, and most dont even understand it.

    What this proves is that interoperability is key. MP3 has the benefit of playing on IPods. Its not DRM free that people care about. What they want is to be able to buy music for the device they have… duh! If people cared about DRM, iTunes would not be a success. Why dont the people that think that the world revolves around DRM explain that!

  5. Hank Williams says:

    Actually amazon’s success does not prove the significance of DRM free music. The truth about DRM free music has been demonstrated with apple’s DRM free stuff with EMI. As should be obvious, but isnt to tech insiders, civilians don’t care about DRM. They will not pay more for it and they will not change their habits for it. Most people don’t even understand it.

    What this proves is that interoperability is key. MP3 has the benefit of playing on IPods. Its not DRM free that people care about. What they want is to be able to buy music for the device they have… duh! If people cared about DRM, iTunes would not be a success. Why dont the people that think that the world revolves around DRM explain that!

    Oh and by the way I dont work in the record business, but I have worked in internet music. It just galls me that the tech “thought leaders” are generally so ignorant about the real behavioral dynamics of so many things relating to entertainment, and opine on it based entirely on the wisdom of the tech crowd and not real data.

  6. Michael C says:

    Wish Amazon success, if only to stop Apple becoming the Microsoft of music.

  7. Daniel Langendorf says:

    @Mark, thanks for the clarification. You’re right. I should have caught that. At least you keep me honest.

  8. mat says:

    @Hank:
    The only way to have interoperability without paying lots of bucks is… mp3.
    That’s not only because different brands purpose different DRM (aac and wma above all),
    but also because some brands reject his own drm scheme to support newer ones
    (check about Microsoft Zune and play4sure issue, for the happiness of all the customer
    who PAID for such music, already becomed trash…)