The 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.
“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.