Amazon to start selling DRM-free music?

There are rumours that Amazon may start selling DRM-free music in the new year in an attempt to unseat the iTunes Store from its dominant position. If this comes to pass it will be a good lesson to the recording industry which has been less than exuberant about embracing new digital technologies like, well, the Internet and the iPod.

According to The Register, Amazon is gearing up to take advantage of the tremendous growth in the music download business (no surprises there). What makes this possible service interesting is that the music is intended to be free of any form of digital rights management. This would make Amazon even better than eMusic for us South Africans because we would presumably be able to buy current music without having to worry about DRM (assuming, of course, that we will be permitted to buy music from the Amazon store). Hypebot suggests Amazon may have little choice but to go this route to avoid the increasingly complex DRM requirements that new devices like the Zune are introducing to the market:

As the first major download store launch since Microsoft made it clear with ZUNE that it was not supporting it’s own PlayForSure DRM, perhaps Amazon was left with no choice. Yahoo! Music, Napster, URGE and others based on PlayForSure are starting to look like forgotten step-children. Only eMusic has gained real momentum against the iTunes juggarnaut and eMusic sells mp3’s.

Plus by embracing mp3’s, Amazon completely avoids all player compatibility issues by selling in the only format that plays on all devices including the ubiquitous iPod.

The challenge that remains is what to do about people who are inclined to share these DRM-free songs with their friends. I can imagine the recording industry must be pretty concerned about the prospect of unprotected music going out into the wild and it will be an achievement if Amazon can pull this off. Of course this also begs the question whether eMusic will survive such a service by Amazon. According to Hypebot, Amazon’s pricing structure may be far more appealing to the record companies and this might put eMusic in a difficult position where it must either increase its prices or face being marginalised.

eMusic has amassed an impressive catalog including virtually every signifigant US and most foreign indie label. By offering an effective per track cost of around $.33, the service is an attractive a lternative for heavy downloaders who love independent music and want to consume it in a safe, legal and convenient environment.

But Amazon is reportedly saying to consumers that they don’t need to by a $10-$20 monthly subscription. Amazon will sell you the tracks you want when you want them, and they’ll download as DRM free mp3’s. The cost will certainly be closer to the $.99 industry standard, but not always. Amazon is also offering variable pricing that we suspect labels will use to encourage full album and catalog sales.

How will cash strapped labels react? How long can labels accept a share of 33 cents from eMusic, when a download at Amazon should net them closer to the $.65 from a $.99 cent track as it does at other sites? If Amazon’s plans are as rumored, eMusic will be stuck between raising prices and risk driving away subscribers and loosing key labels who are unhappy with a 2/3rd’s lower payout.

The major labels have never embraced eMusic and it’s smaller payouts for unprotected downloads. But what if Amazon’s offer of variable pricing coupled with their powerful brand is just enough to entice major labels to make more music available as mp3’s? Then an eMusic subscription becomes even less attractive.

(Source: TUAW)

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