Amazon’s MP3 Store, One Year In: No iTunes Killer; Probably Won’t Be
by Peter Kafka
Posted on December 15, 2008 at 8:58 AM PT
Amazon has been selling digital music from all the big music labels for nearly a year now. It’s the first major challenge to Apple’s hammer lock on that business. So how did it do?
If you view Amazon’s MP3 store as a would-be iTunes-killer, or even a would-be iTunes rival, it has failed miserably. Neither Amazon (AMZN) nor its big label partners–Warner Music Group (WMG), EMI Music Group, Sony (SNE) and Universal Music Group–is publicly releasing any sales numbers. But the best estimates I’ve been able to get from label executives give Amazon 5-to-10 percent of the digital music market, with Apple (AAPL) hanging on to its 70+ percent share.
Billboard reaches the same conclusion, pegging Amazon’s market share at eight percent. Lucas Gonze, a smart digital music guy who spent a brief stint at Yahoo (YHOO) after it acquired his start-up, does some back-of-the-envelope math and concludes that Amazon’s store contributed all of $82 million to the music business, and that Universal collected most of that. That same math means that Amazon grossed all of $39 million from its music store.
And while Amazon’s presence–and the fact that all of its music was sold as MP3s, meaning there were no DRM locks on the songs–was supposed to give the labels more leverage when they negotiated with Apple, we have yet to see Steve Jobs make any significant changes in his contracts.
But the labels would still rather have Amazon in the game. The fact that the world’s biggest e-commerce company is in the music business does have some tangible benefits, like giving players an easy way to get into the music business: Both News Corp.’s (NWS) MySpace and T-Mobile’s new G1/Google (GOOG) phone, for instance, use Amazon to sell downloads. There’s no way Apple would have worked with either platform.
And Amazon can afford to lose money as it figures out its digital media strategy–the company logged nearly $4.3 billion in sales last quarter alone. Right now, it seems content to serve a handful of dedicated MP3 fans/anti-DRM zealots who are actively shunning Apple. But I’m guessing Jeff Bezos and crew have bigger ambitions. So when do we see what those look like?
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Comments
And, the major labels appear to be still clueless about what to do.
See http://www.allaboutjazz.com/php/news.php?id=26953
Posted by Dave Barnes at December 15th, 2008 at 9:32 amNot only that, their files are cheaper than iTunes so the major labels are probably quite glad that their sales remain low.
Posted by mimi yuyu at December 15th, 2008 at 10:22 amThis just goes to prove:
The labels don’t really want to give up drm
Apple does it right
iTunes pricing is right on the sweet spot.
and that the labels should just admit all the above
DRM as a way to reduce piracy works about as well as paining a yellow strip along the Mexican boarder with signs saying “do not cross”.
With Amazon’s music downloads I can download equally on a Windows computer (if I had one), an Apple computer or my Linux machine. I don’t have to remember to make a special unlocked “backup copy”, I don’t have to worry about who to call should I ever change laptops and forget to “de-register” the old one.
I have even started buying MP3s from Amazon just to avoid trying to find an already purchased CD in my stacks to rip it myself.
Online, Amazon is not promoting the heck out of their download service. They of course still make a lot of money selling CDs (as Apple does not) and so would be competing against themselves.
I don’t see Apple with staying power in either the MP3 player or cell phone market. Not because they can’t but because they have no interest in commodity products. Once they’ve blazed a trail, they want to go on to the next thing. This is an admirable trait, but not one on which to build an industry giant. I’d say that the days of companies like G.E. are behind us (look at all the things they have done and still do over the years), but then Amazon started out as a book seller, now sells just about everything. They’ve become a vendor of CPU cycles, an unheralded player in search and advertising, and with Kindle, a hardware company. Apple has certainly done some interesting things, but of the two, I think Amazon is the more interesting company.
Posted by Mac Beach at December 15th, 2008 at 11:11 am@ Mac Beach (very droll)
“Apple has certainly done some interesting things, but of the two, I think Amazon is the more interesting company.”
Yes, that’s why the Kindle is outselling the iPhone by how many? And don’t tell me that they can’t make enough.
So based on what you say one assumes you are a linux fanboy? Good for you – luckily the world isn’t with you on this one and the first time Amazon actually does something that HASN’T been done before then maybe you might have a point.
hmmm.
Posted by John Molloy at December 15th, 2008 at 11:59 amitunes has the user base from its ipod success
that probably prompted amazon to create the kindle book reader
to prevent apple from putting out its own ipod book reader and taking that e-market also
ipod will want movies,music,books markets
Posted by Sam Harrison at December 15th, 2008 at 12:24 pm@Sam Harrison: “that probably prompted amazon to create the kindle book reader
to prevent apple from putting out its own ipod book reader and taking that e-market also”
Unfortunately for Amazon, Apple already has the number one ebook reader on the market: The iPhone/iPodTouch — where far more people have installed Stanza, eReader or other ebook reading software than Amazon has sold Kindles.
As for DRM, yes it is bad, but it looks like the record companies are about to cave and join EMI in selling music DRM free on iTunes.
Posted by Ted Todorov at December 15th, 2008 at 1:11 pmTed, labels will likely eventually sell their music DRM-free on iTunes – though that was already was supposed to happen, and contrary to what you read on rumor sites, isn’t happening in the near future.
Posted by Peter Kafka at December 15th, 2008 at 2:42 pmBut they won’t really be “caving”, because there doesn’t seem to be much reason for them to sell DRM-free tracks on iTunes. The number of people who aren’t buying iTunes tracks because they have DRM is quite small.
Hang in there Amazon… your goal is not to destroy iTunes. It is to provide a great purchasing experience WITHOUT copyright BS; deliver the customers what they want – not what Job’s says you have.
There is NO NEED to have one service… which iTunes overcharges too!
Posted by Dave Friedel at December 15th, 2008 at 11:22 pmBreaking news: “Apple Unveils DRM-Free Music on the iTunes Store”. Perhaps Amazon is a bit more relevant than all you Apple zealots think. Here’s some advice: take a purple pill, relax, and try spending more time cuddling with humans than with your iPhone.
Posted by Brian Hansen at January 15th, 2009 at 10:36 pm