Amazon MP3, Apple iTunes and a DRM free world

Traderthoughts.com submits:

On January 10, Amazon.com announced the addition of Sony BMG Music Entertainment to its repertoire of labels available at Amazon MP3, the DRM-free music store of Amazon.com. With this deal, Amazon is now offering DRM-free MP3s from the four major music labels - EMI, Universal, Warner Music, and Sony BMG - and 33,000 independent labels. This deal puts Apple (iTunes) at a disadvantage.

The music industry has been witnessing rapid downfall in the sale of CDs. Some solace in this environment is the increasing sales of digital songs and albums. iTunes, with more than two-thirds marketshare, has been successful in making the customers pay for online music. The music industry will now be looking forward to AMZN's role in increasing sales of digital songs and albums - AMZN now supply almost 3.1M DRM free songs. The Sony BMG deal brings in a massive portfolio of leading artists that include Backstreet Boys, Beyoncé Knowles, Britney Spears, Carlos Santana, Celine Dion, Kenny G, Michael Jackson and more.

The advantage of Amazon MP3 is that it is compatible with hardware devices like PCs, iPod, Zunes, iPhones and BlackBerrys, and can be used with applications like iTunes and Windows Media Player. However, most of the iTunes songs restrict user choice as they came with Apple's proprietary FairPlay DRM, which made these songs compatible only with Apple music players. The top 100 songs at Amazon MP3 come at a price of $0.89 each and most other tracks are offered at a range of $0.89-$0.99, when the songs at iTunes are sold at $0.99 per song. This variability in price, will attract both the labels and the customers.

Record companies would also have liked the creation of a counterbalance to Apple's dominance in the sales of music. Media opinion is that Apple exerts authority in pricing and other terms while negotiating with record labels. Promoting DRM free songs is finding favor with marketers too. On January 14, Pepsi announced its tie-up with AMZN to promote Pepsi Stuff, a program through which consumers can collect points from Pepsi packages and redeem them for downloads from Amazon MP3. This promotion, beginning February 1, is touted as Pepsi's biggest promotion ever and will mark its debut on the Super Bowl. Earlier, in 2004, Pepsi had a promotional arrangement with iTunes.

Apple will feel the heat. More importantly, the final nail in the coffin for DRM enabled songs has been hammered.