“In recent years, Amazon.com Inc. Chief Executive Jeff Bezos has explained his company’s deliberately paced approach to the digital-music business by saying he wants to avoid simply imitating the dominant player in the field, Apple Computer Inc.’s iTunes Music Store,” Ethan Smith and Mylene Mangaindan report for The Wall Street Journal. “Now Amazon, the world’s No. 1 online retailer, is in advanced talks with the four global music companies about a digital-music service with a range of features designed to set it apart. Among them: Amazon-branded portable music players, designed and built for the retailer, and a subscription service that would deeply discount and preload those devices with songs, not unlike mobile phones that are included with subscription plans as part of the deal.”
“Music executives privately welcome Amazon’s plans, which they see as one of the only credible challenges to Apple’s hegemony in both digital music and portable players. Now the question is whether Amazon’s massive customer base is enough to offset a long delay in entering the online music business,” Smith and Mangaindan report. “The service could be launched as soon as this summer, according to people familiar with the matter. Amazon declined to discuss the service, and hasn’t finalized deals to license content from major music companies… The move is crucial for the Seattle-based retailer’s long-term strategy. Despite offering a vast array of products from gourmet coffee to garden hoses, Amazon depended on physical media like CDs, DVDs and books for 70% of its 2005 sales. To maintain its dominant position, Amazon will need to hang on to consumers as they migrate to digital delivery of those products.”
“Amazon’s online music plans would take advantage of the company’s strong position in selling CDs and portable music players. The online retailer sells an estimated 10% of digital music players in the U.S., including iPods, and the pending deal could hurt its relationship with Apple. If Amazon’s competing offering presented enough of a threat, Apple could even stop selling iPods on the site, says Chris Crotty, senior analyst at iSuppli Corp., an El Segundo, Calif., market-research firm. Apple declined to comment,” Smith and Mangaindan report. “Amazon hopes to set itself apart [by offering] a subscription service, in which users pay a flat monthly fee for access to an unlimited amount of music [and] Amazon has discussed offering subscribers digital-music players that come preloaded with tunes suggested by the online retailer, based on factors such as the subscriber’s personal CD-buying history on the site. The preloaded music could be kept on the player as long as the customer pays the monthly fee, but could also be swapped out for other songs during the course of the subscription. Another likely feature: the portable players would be free or very cheap with a long-term subscription — say, a year — similar to the way cellphone providers subsidize the cost of new handsets when customers commit to service agreements. It’s possible Amazon would price the subscriptions close to what competitors typically charge — about $15 a month — and has said it may offer discounted CDs to subscribers.”
Full article with more here.
Even if Amazon launched today, it’s just way too late. Apple simply holds too strong a position. Various subscription services have uniformly failed to do anything negative to Apple’s iTunes Music Store (which also offers music videos, TV shows, podcasts, etc., by the way). Free music players from Amazon with subscriptions don’t sound as hot as it might have years ago with iPod prices now starting at $69. At best, this is a play by Amazon to compete for Apple’s leftovers and attempt to offset their CD sales losses to Apple’s iTunes Music Store.
No portable music players have “scratched” Apple iPod’s dominance to date; an Amazon-branded player from third-parties won’t succeed where Sony, Creative, Dell, iRiver, Virgin, Rio, and many others have failed miserably. And Apple’s certainly not sitting still with hot new iPod models debuting regularly.
Apple just has too many weapons with which to combat threats to iPod and to iTunes. Apple could cut iPod prices and win any price war. Apple could license FairPlay. Apple could flick the switch on subscriptions for music and/or video. Not that any of those options are even remotely within the realm of possibility right now: Apple’s iTunes Music Store dominates the market with 80% or so share. And iPod dominates the portable digital media player market; iPod models currently occupy the top 9 spots of Amazon’s MP3 Players best-sellers list, including the top 4 spots of Amazon’s Portable Digital Media Players best-sellers list, the top 6 spots of Amazon’s Flash Drive-Based MP3 Players list, and the top 4 spots of Amazon’s Hard Drive-Based MP3 Players list. If Apple pulled iPod from them, Amazon immediately would not be selling an estimated 10% of digital music players in the U.S.
This play by Amazon just doesn’t add up to a rival for iPod+iTunes. However, it may cause some serious angst in Napster’s, RealNetworks’ and other also-ran online music services’ headquarters.
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Related articles:
EMI Music Chairman: Music subscription services like Napster and Rhapsody haven’t beeen huge – January 23, 2006
BusinessWeek: Apple unlikely to launch music subscription service – August 15, 2005
Study shows Apple iTunes Music Store pay-per-download model preferred over subscription service – April 11, 2005
More blood on Apple iPod’s Click Wheel: Sony’s Walkman Bean is cooked – February 13, 2006
More blood on Apple iPod’s Click Wheel: Dell dumps ‘DJ’ hard-drive MP3 player line – February 04, 2006
More blood on Apple iPod’s Click Wheel: iRiver pulling out of Europe? – February 01, 2006
More blood on Apple iPod’s Click Wheel: Thomson gives up on MP3 player, CE markets – December 12, 2005
More blood on Apple iPod’s Click Wheel: BenQ withdraws from MP3 player markets – November 28, 2005
More blood on Apple iPod’s Click Wheel: Olympus halts production of portable digital music players – November 09, 2005
More blood on Apple iPod’s Click Wheel: Rio is dead – August 26, 2005
Sony to combat music market ‘maestro’ Apple Computer with ‘Walkman Beans’ – August 18, 2005
Apple’s iPod has blood on its Click Wheel: Virgin Electronics is dead – March 08, 2005
and maybe Amazon can do it right. More power to them if they can pull it off, with hardware to equal the iPod.
Most of us want to KEEP our music without paying forever, though.
And paying forever isn’t what most of us call a “free” player.
Great analysis. I have to say that Apple’s dominance in this market is getting scary, may have some negative implications with labels, etc., not playing ball with them. Thank goodness that they are not an inherently evil corporation like those to the North.
Amazon makes a bundle selling iPods. Why lose a bundle with a no name player? Wouldn’t an iPod by Amazon make much more sense, especially if pre-loaded with customer purchased CDs worth of songs?
The biggest problem Amazon faces is technical. How would they service these devices? Through the mail?
You just have to walk into an Apple store to see the amount of service required for iPods. Much of it the customers fault and issues relating to Windows.
Still, with no service desk, they will have to set up a overnight mail in service or an actual center. I can’t see either being viable for Amazon.
Then subscriptions have also shown to not really work either so I don’t know what they are thinking there.
Apple has got the market because they made a better widget and they have the infrastructure to make it work that the others lack. The retail stores are part of the iPods success.
Can you imagine having an iPod and needing service and the only thing you could do was to mail it in to Apple? Would you imagine Millions of people having the patience for that?
The MDN Take with a few changes,
XP DailyNews Take: Even if Apple launched OSX 10.5 today, it’s just way too late. Microsoft simply holds too strong a position. Various operating systems have uniformly failed to do anything negative to Microsoft Windows. Even a free OSX from Apple doesn’t sound as hot as it might have years ago. At best, this is a play by Apple to compete for Micorsoft’s leftovers.
No OS has “scratched” Micfosoft’s Windows dominance to date; an Apple Intel computer won’t succeed where IBM, Be, Linux, Sun, Commodore, Amiga, and many others have failed miserably. And Microst’s certainly not sitting still with hot new Vista models debuting in the fall.
Microsoft just has too many weapons with which to combat threats to Windows…..
• Too late!
• Look at Real – dying
• Look at Napser 2 – dying
• Both being ripped off for their subscription music wholesale.
• Artists and record labels being ripped
• iTunes makes labels and artists money
Oh, for our PC friends, there is a update (patch) to run 10.4.4 on non-Apple hardware. (that was fast)
http://www.macnn.com/articles/06/02/15/mac.os.x.x86.patches/
Do your worst Amazon. Apple will send you broke like it has done to countless others.
hahaha… Good luck with that, Amazon!
http://musobs.blogspot.com/
MDN Take: “If Apple pulled iPod from them, Amazon would immediately not be selling an estimated 10% of digital music players in the US”
Or, to look at it another way, if Apple pulled the iPod from Amazon, it would immediately be selling an estimated 10% fewer digital music players in the US.
Let’s not forget that not only is Amazon not US only, but it also provides Apple with a broad distribution network in countries where iPods aren’t always widely available at retail or where people are simply comfortable shopping at Amazon. I don’t think the iPod is in enough people’s hands yet for this to be an option at this point in time.
I also don’t think pre-loading Amazon players is viable. It would be a logistical nightmare and push costs up. More likely is that Amazon would recommend music when you plug your player in if you’re not sure where to start.
You know the one-click feature in iTMS and the Apple Online Store? Guess who owns it? Amazon. In fact, Apple is the only retailer other than Amazon to use the system, which has proven to be largely secure from the kind of stuff that happens with Pay-Pal, etc.
Steve Jobs and Jeff Bezos are friends and have been friendly in business for a long time. Apple and Amazon both know that companies can compete in one market and cooperate as well. What will be interesting is what file formats and DRM systems will be used and what platforms supported.
I welcome Amazon to the party. They are an Apple friendly company that provides a good product and service. I am sure that they have not taken entry into the field lightly. As long as it’s not Windows only WMA/WMV, I have no problem. They wouldn’t want to be ‘Played for Sure’ like Rob ‘Krispy Kreme’ over at UnReal Networks.
Reality: The MDN Take with a few changes,
XP DailyNews Take: Even if Apple launched OSX 10.5 today, it’s just way too late. Microsoft simply holds too strong a position. Various operating systems have uniformly failed to do anything negative to Microsoft Windows. Even a free OSX from Apple doesn’t sound as hot as it might have years ago. At best, this is a play by Apple to compete for Micorsoft’s leftovers.
No OS has “scratched” Micfosoft’s Windows dominance to date; an Apple Intel computer won’t succeed where IBM, Be, Linux, Sun, Commodore, Amiga, and many others have failed miserably. And Microst’s certainly not sitting still with hot new Vista models debuting in the fall.
Microsoft just has too many weapons with which to combat threats to Windows…..
Actual Reality:
How about answering the topic at hand?
Microsoft will always dominate the OS market for the foreseable future. It doesn’t mean that it’s OS is anything great. Even Gates more or less admited that. It’s just that he got to a dominant position and market share that it would make any assault tough. In most cases impossible only by the sheer numbers involved.
It still does not make it a better product by no means. How can Vista be any better when even before it has been released it has viruses for it already? And OS X is still virus free? It’s not market share, there are many who are even offering money to see if somebody can come up with one. Not to mention the bragging rights. It’s not to say it can’t or won’t happen but the reality is and has been that Windows is inherently flawed.
Microsoft does not have to make a better product given their dominance and it keeps many IT guys happy and employed.
For example: why do automakers paint BUMPERS on cars? To make the car work better? To look nice? Please, it’s so any scratch or ding essentially makes the bumper into a repair. It keeps the parts dealers and repair shops happy.
Now Microsoft is turning there inability to make a better OS into a profit center by offering virus protection. This is the same way the mob works. Nice OS, shame if anything happened to it….
Any new competitor to the iPod, or iTMS will be using MSFT’s WMA software. That immediately puts the new competitor in competition with a dozen other vendors for less than 20% of the market.
There isn’t enough room there for any of the WMA devices to gain enough traction to fight iPod.
Someone first has to grab a 10% share just to get any attention from the consumer. Even after accompishing that fete, in a horribly fragmented market, they are going up against a juggernaut that is 8X their size with a fully integrated offering.
Two years ago I would have been concerned about Amazon entering the fray. Today I see news like this as an attempt to negotiate something more favorable from Apple.
It will be funny to see iPods topping the best seller lists at Amazon, while their own players are nowhere to be seen.
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“designed and built for the retailer”
No thanks, I’ll keep the one designed and built for the end user.
Nowhere does the phrase “iPod Killer” appear anywhere in the article!
I’m impressed!!! Is this a first? I thought I clicked on the wrong story.
Can you only rip Amazon music CD’s?
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I do hope Apple will continue leading this digital market forever.
However hope they won’t be slowing down eventhough they are the market leader.
Learn from the previous market leaders
• Palm vs Pocket PC
• Netscape vs IE
• IBM vs M$crap (ops, I mean M$DOze, still can’t get it right…)
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Stewie,
I agree that Apple is the best operating system. I would never buy a Windows computer. That was not the point of my post. It was not meant to be a flame. It was meant to point out how arrogant MDN is with an 80% market share for iPod but thinks that Windows’ 95% market share is vulnerable. It is not realistic to predict that Apple will even come close to 10% market share in computers. Apple’s production capacity would have to be enormously expanded as well as its international sales network. Without partners; i.e., clone makers, it is fantasy to think otherwise.
The comments about Amazon coming too late to the digital music player party could equally have beeen said about Apple when they launched the iPod. This happened, yet the iPod went on to become the dominant player in the market.
The reality is that the iPod’s position is not unassailable. The biggest threat to them is mobile phones, virtually all of which now incorporate a digital music and video players and are being given ever increasing amounts of storage. In many places (like here in the UK) mobile phones are free… My phone has already replaced my PDA – I expect that the next phone I get will replace my iPod too.
If Apple don’t produce an iPod-phone then the iPod market will die within a few years.
I must say though that I remain completely unconvinced by Amazon’s approach.
By the time Amazon launches in summer, Apple will have released its next big thing for digital content – iPod or not. And unless Amazon licenses (or reverse engineers) the dock connector from Apple, it will be locked out of the iPod accessories market.
As for music companies working against Apple, they might be dumb enough to try it, but they know that Spitzer, Attorney General NY State has them in his sights if they try any sort of collusion.
Just one more money-losing venture for Amazon.
Flsh memory prices alone will make margins next o nill if are, in fact, planning on subsidizing the players.
Wish ’em luck.
It’s been a long time since I’ve bought something from Amazon. When you factor in delivery and everything, I’m finding the street to be cheaper.
I see Bezos as more credible than the other bozos, but does he have a Unique Selling Proposition? Has he anything fresh to contribute to this market? He’s had some time to think about it.
Apple will never be the sole vendor in the space, and it looks like they won’t stand still or rest on their laurels.
MW: Problem?
I’m curious as to what the interface to their music store would look like. Would they offer a cross-platform standalone app like iTunes for their customers to download. I doubt it. And I can’t imagine any browser based interface having anything near the appeal and ease of use of iTMS. They’re probably hoping that people will use iTunes/iTMS to find what they like and then come to Amazon to rent it.
More competition the better. with more competition we consumers only benefit.
With no competition it is like living in some dictatorial, oppressive middle eastern country that only allows one point of view – no competition for ideas, total oppression of thinking outside the religious dictatorila mantra.
Without Apple just think how bad Microsoft OS would really be….
Looking at this from a neutral perspective, it’s not such a stupid idea as some people here would have you believe.
There have been plenty of fairly decent MP3 players built, but although the hardware was acceptable, they failed because there was no iTunes or iTMS for them. We all know that it’s not enough to simply have the one element, all three need to work flawlessly. That piece of wisdom is now common knowledge – although still not universally understood.
Assuming that Amazon have the sense to go with a good hardware design, they are probably more likely to offer a good alternative to iTMS than any other company is. They certainly have an excellent track record when it comes to on-line commerce, so we can assume that their version of iTMS is likely to be very good.
That leaves them with the task of coming up with an alternative to iTunes. Several years on, it’s amazing that nobody hasn’t already devised something comparable. If they can do that, then they might be in with a chance, but it’s a big ‘if’.
Personally I don’t reckon Amazon’s chances. If a large outfit like Sony can fail so spectacularly, then the difficulty of the task is quite obvious. But on the other hand, they already have a good relationship with the record labels and those labels are keen to try and stop Apple becoming too strong in music distribution, so Amazon may get favourable treatment from some labels.
In short, they have a lot going for them, but I think that Apple is now so far out in front that nobody else is likely to be able to compete in the near future.
To Reality: The biggest difference with your comparison is this.
The 80% share that iPods have, those people are happy and love their product.
The 95% share that Windows has, many of those people are unhappy and have to use PC at work, were uninformed and have a PC at home, but still can’t stand to use it. They turn it on when they have to type something up or try to surf the Internet and just hope it doesn’t crash before they are done.
Two very different groups of users. iPod users, very happy. PC users, middle of the road probably.
So what you have is a Naster, Amazon, ect, trying to switch a very happy crowd from the iPod to something else. Very difficult.
Apple trying to switch a frustrated, god what else is there, hohum, ect, crowd from Windows to an OS that promises ease, no spyware and great software that just works.
Much easier to convert unhappy people.