Amazon.com to Sell Music Downloads for iPod

Online retailer Amazon.com says it's joining the movement to sell songs that can be copied for free to computers, cell phones or music players, including the iPod. Until now, iPod users were mostly restricted to music available in Apple's iTunes store.

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RENEE MONTAGNE, host:

And our business news starts with the growing world of free online music.

(Soundbite of music)

MONTAGNE: Yesterday, Amazon.com announced it's joining the movement to sell songs that can be copied for free to computers, cell phones or music players, including the iPod. Amazon is the biggest online seller of CDs. Now it plans to sell music in a flexible format. Until now, iPod users were mostly restricted to music available in Apple's iTunes store.

STEVE INSKEEP, host:

That's because the music has a digital lock that controls where and how you can play the song. Amazon says consumers find that arrangement confusing and off-putting. So yesterday's deal launched the music downloading service that offers songs without the lock, also called Digital Rights Management, or DRM. Now, last month, Apple struck a similar deal. And that's especially important because Apple controls more than 85 percent of the market for music downloads.

We have more this morning from NPR's Laura Sydell.

LAURA SYDELL: Amazon proudly announced a deal with one major music label, EMI. Bill Carr, Amazon vice president of digital media, says the label's entire digital catalogue will be available on the new service.

Mr. BILL CARR (Vice President of Digital Media, Amazon): And that means that great artists like Norah Jones and Paul McCartney and Coldplay will be part of our service.

(Soundbite of song, "Clocks")

COLDPLAY (Rock Band): (Singing) Ooh, ah.

SYDELL: Amazon's Carr says the retailer will also sell music from 12,000 smaller record labels. Last month, EMI announced that it would offer DRM-free music on the iTunes music store, and it became the first major record label to do so. The other labels have resisted DRM-free music because of concerns about piracy. It was EMI's leap of faith that prompted Amazon to get into the music downloading business, says Carr. He says the retailer wanted to make sure that the songs would be compatible with any of the digital music players they sell.

Mr. CARR: And the past, if we offered, you know, DRM tracks, that people would then be confused about will this play with my Zen and with my Zune?

SYDELL: Close to three quarters of the music sold on iTunes can only be played on an iPod. Michael McGuire, an analyst at Gartner Research, believes Amazon could be a serious challenger to iTunes, which, so far, has dominated digital music sales. He thinks customers will be drawn to the Amazon site for more than music downloads.

Mr. MICHAEL McGUIRE (Analyst, Gartner Research): Because Amazon has both physical CDs and now is planning to have this online music store, well, what else do they sell, too? Well, they sell physical things. It could be t-shirts. There could be lots of interesting things there.

SYDELL: But others believe that Amazon is more likely to expand the digital music marketplace rather than compete directly with Apple. Right now, digital music accounts for less than 20 percent of all music sales, and people are buying fewer CDs. James McQuivey is an analyst at Forrester Research.

Mr. JAMES McQUIVEY (Analyst, Forrester Research): Apple's users are a very small minority of relatively wealthy, relatively media-savvy people. The Amazon customers are a little bit more mainstream than that. And so Amazon is in a position to actually open the market overall and make the whole market just a little bit bigger.

SYDELL: Still, Amazon faces some challenges going forward. While it has EMI, Amazon's missing the other major labels, which account for about 65 percent of the market and can be found with DRM on iTunes.

The other big question mark is how Amazon will price its music, and whether that will be competitive with other online music retailers. But analysts believe that if both Amazon and iTunes are successful in selling EMI's catalog without DRM, the other major labels will follow.

Laura Sydell, NPR News, San Francisco.

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