The "Amazon-Pod"

Is this the future of digital music?

On Friday, we reported that Amazon was planning on getting into the online music buisness. Like in a big way, with plans to take on iTunes. After all, Apple controls 75% of the digital music player market, and even more significantly, 83% of the iTunes market. This may be as close to a monopoly on a product or service in recent corporate memory.

It's not completely clear where Amazon is headed at this point. All of us welcome competition in this area. At the least, this should make it cheaper to buy the compressed music, than the CD. Right now, we're paying for convenience over quality.

The Wall Street Journal article has some ideas on how Amazon's store will differ from iTunes:

A couple of key ways Amazon hopes to set itself apart would involve a subscription service, in which users pay a flat monthly fee for access to an unlimited amount of music. Subscription services, like those by Napster Inc. and RealNetworks Inc. are typically more profitable for recorded-music companies than "a la carte" download stores like iTunes, which doesn't include a subscription option. However, their subscriber bases of 500,000 to 600,000 are tiny compared with Amazon's 55 million customer accounts.

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.

The allure of subscription services is quite strong. They're ideal for new users as they get access to a large selection of music for a minimal start up cost. The price of admission in within the cost of a CD or two, and you can fill up your hard drive at the "all you can eat" music buffet. However, before you think that this is the best deal since that 99 cent buffet you gorged yourself on last time you were in Las Vegas, there is a catch. It's a big one; you're really renting, and not owning. That means that every month you keep paying, and once you stop you really have nothing. Personally, I'd lean towards owning the music on my player. It may be less, but at least it's mine.

I also read this model over at CD Freaks:

Unlike Napster, Yahoo, Microsoft and other providers that rely on WMA-DRM compatible 3rd party players to play music purchased from their services, Amazon plans will use Apple's approach by using their own proprietary DRM technology in their players such that their players will only work with its music service and vice versa. This also means that consumers will know what can play their music and obviously what music can be put on an Amazon branded player.

Unfortunately, if Amazon's music service and players turn out very successful, they could end up killing off independent music services, since their music will not play on an Amazon's proprietary player. For the consumers, this means one more online store to take into account when purchasing a music player, since like the Apple iPod and Sony's Walkman series, none will play each other's music.

This really would be going too far. They seem to suggest that Amazon will have their music in a special Amazon only format. What if there is some music only on iTunes, and some only on Amazon? Of course, there will be those among us, like me, that will want to be able to hear tracks from both. Will we have to own two sets of hardware? Both an iPod, and an Amazon player? I can envision the Hack-A-Day sites coming out with the inevitable articles "Flash Your Player So You Can Play Any File!" Let's not even get into Wal-Mart and their music store; what would we do if they started selling a Wal-Mart branded music player that only played songs from their store?

This splinterization of the music formats is clearly to the detriment of the consumer. We want one player that is able, out of the box, to be able to play our music, whether purchased on CD, from iTunes, from Amazon, or from the countless other retilers. At least iPods can play MP3's. It's not clear at this point if Amazon's player will even support this universal format.

Sony's Walkman was a success because it could play everyone's tapes. Sure, Sony boosted sales of their own cassettes, prerecorded and blank, and that's just good business. While Apple is currently dominating, efforts like Amazon's future store and player must be crafted carefully to offer the consumer true value. Stay tuned to see which way this is going. For now, this horse race is just too early to call.

--Jonas