“Analysts believe Apple has far more to gain than lose should Amazon succeed as a digital downloads retailer,” Scott Morrison reports for Dow Jones Newswires.
“Despite media reports that portray Amazon and Apple as rivals, analysts argue that the Internet retailer’s music service would target the two-thirds of Americans over 13 years of age who have so far shied away from digital media, and many new coverts would likely gravitate to Apple’s wildly popular – and profitable – iPod music player,” Morrison reports.
“Amazon’s entry into the digital music market could prove timely for Apple, which all but created the online music market in 2003. The Cupertino, Calif., computer maker now controls about 75% of the U.S. digital download market and some 69% of the digital music player market, according to The NPD Group,” Morrison reports.
“But iPod sales, which account for about one-third of Apple’s revenue, grew just 8% in fiscal 2007, down from 69% the previous year. With the so-called early-adopter market almost fully saturated, iPod sales will increasingly become tied to the expansion of the overall digital media market, and Amazon’s new service could be the vehicle to reach new consumers, said Barry Jaruzelski, a Booz Allen Hamilton strategy consultant,” Morrison reports.
“Amazon’s music service, launched in September, sells only MP3 digital tracks that aren’t wrapped in copyright protection software. That means they can be repeatedly copied and played on virtually all digital music players, including Apple’s iPod,” Morrison reports.
“Gene Munster, analyst at Piper Jaffray, said Apple iTunes could take a hit if Amazon MP3 gets off to a good start and builds momentum. But he noted that the modestly profitable iTunes store exists primarily to sell iPods, which generate gross margins of about 20%,” Morrison reports. “Munster and other analysts predicted that most of Amazon’s digital music converts would wind up buying iPods, simply because no other hardware or software maker has been able to develop a music player that matches the iPod’s sleek design and easy-to-use software. Amazon ‘may have an impact on iTunes sales, but there is little to no risk to iPod sales,’ said Booz Allen’s Jaruzelski.”
Full article here.
[Thanks to MacDailyNews Reader “Mike in Helsinki” for the heads up.]