“The convenience of one-stop impulse shopping from their iTunes music player vastly outweighs the lower prices and DRM-less features of the Amazon store. Further, Apple itself sells DRM-free music and will increasingly benefit from Amazon’s negotiations for that format. So while that vocal minority of music purists who insist on DRM-free music may flock to Amazon’s new store, they will only be helping Apple maintain its music dominance with the vast majority iPod owners and music buyers,” Carl Howe writes for Blackfriars’ Marketing.
“Amazon’s new MP3 store is great for everyone, and it lends choice to the digital music business. But don’t make the mistake of thinking that Amazon’s music business threatens iTunes dominance. Amazon’s music business will simply will put pressure on music labels to reduce their cut of the digital music distribution pie (since Amazon is undercutting Apple in price and can’t do that indefinitely) while expanding choices for consumers,” Howe writes.
Howe writes, “Meanwhile, the vast majority of consumers will continue one-stop shopping for their music, movies and TV shows in Apple’s iTunes, preferring convenience over low-prices. Amazon will fight for the number two spot in digital downloads, while Apple’s iTunes business will dominate digital music downloads — and profits — for years to come.”
More in the full article, including estimates of Apple’s iTunes Store profits, here.
I’ll keep using my iTunes. Thank you very much. No need in downloading new apps, setting up new profiles and giving up even more credit card information to “save” 10 cents. Besides, I still like the liner notes and prefer to buy the physical media. iTunes is more than a store, it’s a media management system that’s hands down the best on any platform.
Yeah, thought I might try the new service myself. So I went there last night to download Shooter Jennings’ cover version of “Walk of Life.” No chance. Yeah, they might have a few DRM-free selections, but nothing anywhere near what they’ll need to shake iTunes’ tree.
“….Amazon’s music business will simply will put pressure on music labels to reduce their cut of the digital music distribution pie (since Amazon is undercutting Apple in price and can’t do that indefinitely) “
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But they aren’t…. Actually, what they are doing is exactly what the labels want, they’ve introduced variable pricing.. Haven’t you noticed the songs for $1.94? Those make up for the ones that are 89 cents. This is what Vivendi wants.. In time, you will see more and more songs at $1.94.
I welcome the Amazon service. Choice and competition are always good. All these sort of articles seem to be written from the perspective that there should be only one download service – irrespective of the whole DRM issue. Personally I’ll use whichever service suits me best, is cheapest, has what I want, or any combination of those and other reasons. I may end up using one exclusively, I may not, whatever.
I personally buy all my dvd’s and cd’s from play.com. Are they always the cheapest? No, but they’re cheap enough often enough so that their free shipping, service and the convenience of using one company (as opposed to having my card details on the server of every retailer on the planet) makes them my first stop. I also use other companies when I need to.
Ive noticed the variable pricing of $1.94 on Amazon and if in time they put more songs at that price then people will just simply flock back to iTunes or torrents, the simple fact is the music labels have to do it our way or no way.
“Apple’s iTunes Store will dominate digital music downloads for years to come.”
Yup. For years to come and for now on too!
The Zune Tang Gang better get used to the facts of life in a post iPod world.
I tried out the Amazon site yesterday. I already do a lot of purchases from Amazon, so I was set up – but it still took a multitude of clicks to pick up the songs. Plus, the download time was MUCH longer than iTunes.
That being said – it worked, albeit slowly – it was easy, albeit with more clicks and the music transferred seamlessly to my iTunes.
Competition is a good thing – it makes everybody better and sharper.
I went to amazon’s site. I looked up The Killers, The Strokes, The Bravery, Muse, Wilco, and several others. None of which were on there. Guess I won’t be using it.
I agree. The store will help prove Apple’s point. People want DRM free music. The labels do not. I will continue to use iTunes. I like the large selection, ease of purchasing and artwork, etc. included with my tracks.
Once you buy several thousand dollars worth of music and mix your playlists, you really dont’t buy much more.
I haven’t updated my iPod in years.
Video on a iPod doesn’t work very well, it’s better on a TV although FrontRow with remote is pretty cool to catch up on series.
Apple is making good money from the iTunes Store. The FAQ from TuneCore — a company that handles digital music distribution for copyright holders — lists the royalty rates paid by online music stores, including iTunes:
For the iTunes U.S. store, you receive $0.70 per song sold individually and $7.00 per album with 11 or more songs sold in its entirety.
This 70/30 split of the revenue was echoed by Vivendi CEO Jean-Bernard Levy, in the midst of his complaining that Universal Music Group’s contract terms with iTunes are “indecent”. Reuters reported:
At present, UMG, the world’s largest record company, gets 0.70 euro ($0.99) out of the 0.99 euro retail price charged by iTunes, Vivendi said.
So, ballpark-estimate-wise, it’s safe to say Apple gets about 30 cents per song sold — and even more for songs sold in Europe, given the euro’s current strength against the dollar. On July 31, Apple announced that they’d sold the three-billionth song from the iTunes Store. Three billion songs times $.30 per song is $900 million.
Bandwidth, credit card processing fees, and whatever other costs Apple incurs running and developing the actual store come out of Apple’s share of the revenue. Those costs are significant, but it’s a pretty good bet they’ve totalled up to a lot less than $900 million.
And, iTunes Store music sales are growing — fast. Apple announced the two-billionth song sold just six months earlier. Even if the acceleration stops, which it won’t soon, Apple is already selling two billion songs per year, for $600 million in revenue.
http://daringfireball.net/2007/09/more_amazon_mp3_store
@tre
Hopefully this will let the music cartel know that people aren’t all that willing to get reamed for their music. Apple’s price is fair across the board, as Amazon starts going to higher priced music obeying the whim of the music cartel people will start getting annoyed and go back to iTunes where everything is the same price.
It will keep Apple off the hook of being accused to be a monopolist in digital distribution services. They need some ‘real’ competition.
@From John G w/love
“So, ballpark-estimate-wise, it’s safe to say Apple gets about 30 cents per song sold — and even more for songs sold in Europe, given the euro’s current strength against the dollar. On July 31, Apple announced that they’d sold the three-billionth song from the iTunes Store. Three billion songs times $.30 per song is $900 million.”
The question is really this – is there any money in this for Amazon? Not really. $900 million is not really a lot of money over the course of more than 4 years since the store opened. And it’s the most Amazon could hope to make under the best circumstances, but the problem is that while Amazon sells players, they don’t make what Apple makes on them, they just make a retail markup. The DRM issue is central to the issue for them, because they sell iPods and Zunes and everything else. That’s a good thing. But at worst, Amazon might take a few million in sales from iTunes, while pushing MP3 players sales overall. And 70% of those overall player sales go to…
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The Music industry and the TV industry is starting to stout the same miss guided BS of multi tier pricing and bundling. The funny part is Vivendi and NBC act as though the magic to success and the savior of their industries are tied to multi tier pricing and bundling. Next thing anybody knows all the tracks on Amazon will be bundled into a hit song, a b track, a re-mix and a ring tone for $6.99, the music industry will call it a “Ringle” and they’ll bet the farm that this bundling of crap will save the industry. You’ll have NBC following right behind with an idea that will rock the industry a hit show, a flop and a ring tone for $22.98. You want to download an episode of The Office, will you have a buy a bundle with “The Office” episode you want plus an episode of “Plumbers on Crack” and a Ring Tone of “Plumbers Crack” for the low, low, rock bottom price of just $22.98+tax and a $4.99 download surcharge.
Track price guys… Apple doesn’t even allow you to purchase long tracks (more than 7 min) individually in most cases requiring you to buy the full album to get such long songs. Amazon does, although they charge more for songs over 7 min, and again for songs over 14 min.
This is not “variable pricing” in the sense Amazon is not charging a premium based on the popularity of the songs, only the length. This is not unfair or gouging. Now if they change and allow labels to charge more for certain popular songs, then yes, you’ll have a point if and when that time comes.
But for now Apple and Amazon are merely handling long duration songs in different ways. If you ask me I think Amazon’s way is superior, but I do appreciate Apple’s hard line stance on not over charging for music.
I welcome Amazon to this arena, and hopefully they won’t become a tool for the record companies which really suck, but I fear that they already are.
What’s in it for Amazon? They hope the store will draw people to the website, where they may buy some other stuff at the same time.
As far as the music companies go, they need this desperately, even if Amazon doesn’t take 30-50% of the download market. The iTunes store is a “monopsony”, a monopoly in reverse, the sole buyer of a product as opposed to the sole seller. In this case, the product is wholesale digital music, and iTunes is the only retailer buying it in any significant quanitity.
This is a terrifying situation for the recording companies to be in, because as the digital music download market grows, and downloads represent a greater and greater percentage of their profits, Apple will have greater and greater power over them. In a sense, Apple will be to them as Wal-Mart is to well, you name it. iTunes will be the one store a music company cannot afford to abandon, so Apple can dictate terms.
The presence of a realistic competitor, even if it just has 20% of the market, gives the music people more leverage in negotiations.
Of course, this only works if Amazon can become a real competitor. Napster couldn’t do it. Neither could Rhapsody. The battlefield of digital music retailer is littered with the fallen bodies of iTunes “competitors”. We’ll see how Amazon fares.
@Robo: “It will keep Apple off the hook of being accused to be a monopolist in digital distribution services. They need some ‘real’ competition.”
They have real competition, it’s called file sharing. They have been up front all along that this is their main competition, they have never lost sight of this. The music cartel mafia is too dim to see it that way, but Apple isn’t.
“Apple doesn’t even allow you to purchase long tracks (more than 7 min) individually in most cases requiring you to buy the full album to get such long songs. Amazon does, although they charge more for songs over 7 min, and again for songs over 14 min.”
That’s the sort of thing that makes it expensive to be a Godspeed! You Black Emperor fan.
By the time the Amazon store gains any traction with this store, four things will have happened—all to Apple’s benefit:
1. Cheap tracks will be the norm—$.99 or less
2. DRM-free tracks will be the norm
3. iPods will still be the norm
4. WMA will not be the norm
The record companies will be beyond the point of trying to sell albums, subscriptions, DRM-encumbered music, variable pricing or any of their other looney tunes.
One more thot…
I actually hope that Amazon gradually takes about 15 – 20 % of the market—which I think is very possible.
That much market share will make all current and future DRM schemes and subscription services seem ridiculous yet still wouldn’t give the record companies much wiggle room to negotiate the prices up.
Can you imagine anyone buying music from the ZuneMarketplace or the Sony store or from Real? All their convoluted DRM seems ludricrous now. (Of course, even Fairplay looks a little long in the tooth as well!)
Fair Play did what it was created to do – pacify the labels and get the market rolling with the least-bad DRM restriction scheme. I never had any doubt that Apple would do away with it as soon as they can.
The music downloader application is less than 1 MB. No complicated install. But you do have to close Safari. I already buy stuff from Amazon so I didn’t need to set up a new account. I downloaded the free song “Energy” to test it. Once it finished downloading, iTunes opened up and there was the song right in iTunes. This is a great alternative if you can’t find something at the iTunes Store but can find it at Amazon MP3 store.
No self-respecting ‘music purist’ would buy AAC/MP3/Whatever encoded music anyway.
They buy CDs or, if they’re crazy, vinyl.
I’ve actually bought a few songs from the new Amazon mp3 download store. I find the low prices in their service and the fact that all music is DRM free whereas Apple sells some music with DRM and some without appealing. In iTunes all tracks for 99 cents are with DRM and you have to pay more for the iTunes Plus non DRMed tracks — for that it is $1.29 with higher audio quality but watermarking of the shopper’s account name etc — which has some people concerned about privacy. Some suggest it shouldn’t be a problem as long as you don’t share those tracks freely with others but others say the ability for someone to trace where a song came from via the watermarking — to trace who bought it originally is not necessarily a good thing.
In the case of movies I read an article a short time back for the war in high definition video between HD DVD and Blu Ray that the real winner is neither format nor online video download stores like iTunes or Amazon Unbox — the real winner is Piracy (TM).
That is consumers will turn to piracy to avoid DRM. In the music scene some companies are now relenting on giving up DRM but in video no DRM is a now show.
I would be happy to pay for my movies if there was no DRM. Same with music. The reason music CDs are in decline — and digital music sales while successful have not become as profitable as the CD is because in the digital world consumers are buying singles. A few tracks of a song that are best.
No one enjoys having to buy an entire album anymore for just 1 song. If you like the entire album you can still buy it but it is preferable to get singles.