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Amazon’s DRM-Free MP3s: Big User Base, Small Catalog?

Seattle — Amazon’s plans to sell music only in the unprotected-MP3 format guarantees the broadest base of compatible playback devices, but doesn’t deliver the broadest catalog of downloadable music, analysts and marketers told TWICE.

Amazon’s downloads will be compatible with more portable, home and car audio devices than any other authorized download site, including Apple’s iTunes site, the analysts explained, but unless other major music companies join EMI Music and independent labels in the Amazon launch, Amazon’s selection will not be as broad as other sites’ selection, they said.

Marketers and analysts also said the announcement by the industry’s largest online merchant:

·doesn’t spell the end of digital rights management (DRM) technology, which must be used by subscription-download sites;

·could diminish the potential appeal of competing codecs such as AAC, if the remaining Big Four music companies join EMI in authorizing unprotected-MP3 sales; and

·won’t give makers of other-brand MP3 players much of a sales advantage over the iPod, given iPod’s ability to play unprotected MP3 music.

Although Amazon held back many details, the company promised to launch its music-download service with millions of songs in unprotected-MP3 format later this year from unnamed independent labels and from EMI, the smallest of the Big Four music companies. Amazon would be the first download site to offer unprotected MP3 music from a major label following Apple’s announcement last month that it will offer EMI-label music in the unprotected Advanced Audio Coding (AAC) format.

Amazon chose unprotected MP3 to make its downloads playable in native form on the broadest range of portable, home and car stereos compared to Apple’s iTunes store and to sites that use the protected WMA format. Unless the remaining Big Four music companies authorize their songs for unprotected-MP3 download, however, Amazon’s share of the authorized download business will suffer, Jupiter Research senior analyst David Card and others said.

In fact, Amazon announced its sketchy plans in advance to persuade other major music companies to jump on board in time for its launch, Card reasoned. The other music companies, however, aren’t likely to jump on board that quickly, he said, because they “have good reason for being wary of going unprotected” and holding back while learning from EMI’s experience. CEO Jeff Bezos said he chose an MP3-only DRM-free strategy to enable playback of Amazon downloads on “any” device, and a spokesperson noted that unprotected MP3s “give customers the most freedom.” Nonetheless, said Card, “This is about Amazon selling songs for the iPod.”

Amazon’s music downloads will be playable on the huge installed base of iPods as well as on all other-brand MP3 players, all MP3-CD/DVD players, all networked digital media adapters (DMAs) for the home, and a growing number of cellphones capable of playing MP3 music. Apple’s protected iTunes downloads, in contrast, are playable only on iPods. Similarly, Apple’s unprotected EMI-music downloads, in the AAC format, are playable on iPods, music-capable cellphones, one or two MP3 players, and many network-connected DMAs for the home.

Like Card, SanDisk senior marketing director Eric Bone doesn’t see a stampede to DRM-free MP3 by the other major music companies. “They’ll let EMI give them answers,” he said. One thing is for sure, however. The Amazon plans “give users the ability to move music where they like to” and provides more choices of playback devices than Apple’s unprotected AAC downloads, Bone said. Apple’s plans for EMI music are “DRM-free bit not format-free,” he explained.

In itself, however, DRM isn’t the issue driving down consumer satisfaction; it’s the proliferation of incompatible DRM technologies, he said. “Artists need to get paid,” he said. DRM will be necessary, he continued, for consumers to access subscription-download services, which enable a level of music discovery that paid-for download sites don’t provide, he said. Download sites, whether DRM-free or not, won’t cannibalize subscription-download services, he added.

Amazon recently entered the video-download business with its Unbox service, which delivers movies and other videos in protected WMV format for playback on PCs and compatible portable medial players.