Finally, the iTunes Store has a worthy opponent. When the Amazon MP3 store opened its digital doors yesterday, music consumers found a lot to like, including things superior to what iTunes offers. Amazon falls short of iTunes in other ways, so this news does not necessarily mean the iTunes Store rapidly will forfeit its dominant position in the music download market. But it is a wake-up call.
First, let's look at where Amazon beats iTunes. By far Amazon MP3's biggest draw is that all the songs it sells are unprotected (free of digital rights management coding) MP3s, which means they will play on any portable digital music player. This could well be the biggest nail yet in DRM's coffin.
The iTunes Store does sell songs from EMI in an unprotected format, but they cost $1.29. Which brings us to Amazon's next advantage: variable pricing, with many songs priced at 89 cents. Not only is that 40 cents lower than iTunes' DRM-free offerings, it's 10 cents less than iTunes' regular price. And Amazon's songs are in a higher-quality 256 kbps bitrate. DRM-encoded songs on iTunes use the lower 128 bitrate, although the DRM-free songs are 256 kbps.
Amazon also gets points for being Mac-friendly (although it requires Mac OS X 10.4 Tiger). Most music download services other than iTunes force customers to use Windows. Amazon offers a helper application that resides on your Mac and activates when you click to download music from the Amazon MP3 site. (See screenshot below).
Although I still prefer iTunes' site design, finding and downloading music on Amazon MP3 is straightforward and easy. If you already have an Amazon account and are logged in, the download automatically is charged to the credit card registered to your account. The songs download to an "Amazon MP3" folder that the helper app creates inside your user's Music folder, but automatically get copied into your iTunes library as well, album cover art and all. (Although I'm not sure I want two copies of every song on my hard drive.)
I've been reading a lot of articles in the past day that cite the above advantages and essentially declare the iTunes Store dead meat. Why wouldn't everyone drop the iTunes Store and buy their music exclusively from Amazon from now on?
The biggest reason right now is that Amazon has a much smaller selection than iTunes – 2.3 million songs versus iTunes' 6 million-plus. Only two of the Big Four music companies are signed up with Amazon right now, EMI and Universal. That leaves out all the artists on the Sony and Warner labels. You can't buy a song from Amazon if they don't offer it, no matter how many other advantages the service has.
Another reason Amazon won't obliterate iTunes any time soon is that the service for now is available only in the United States.
It stands to reason that the Amazon service will continue to improve, and that Sony and Warner will hop on board when they see the juicy sales figures for EMI and Universal. But one would expect Apple to recognize the need to respond to bona fide competition. Customers – even Mac users – will flock to whoever offers the best service with the best prices.
That means Steve Jobs will need to reconsider his position on variable pricing. He will at some point have to upgrade the bitrate of all of iTunes' offerings to 256 kbps. And the DRM will have to go, too.
Apple's problem is that the record companies want the competition to succeed to break iTunes dominance – a 75 percent market share. So they may not be willing to give Apple the same terms as they have Amazon or other competitors. Jobs will need to call upon all of is formidable negotiating skills to keep iTunes in the game.
Most of what Apple needs to do should not be that big of a deal. Remember, Apple only put the DRM on its music in the first place because the record companies refused to allow Apple to sell any music without it. And iTunes already offers the DRM songs in higher bitrates.
But this much is clear: if Apple ignores the challenge posed by Amazon MP3, the iTunes Store will suffer. It figures to lose some market share to Amazon anyway, but how much is up to Apple.
All that said, music consumers will win no matter how the battle between Apple and Amazon plays out. We'll keep getting higher quality downloads for less money and with no DRM restrictions. Hallelujah.
