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Hypebot's New Music Business Briefing For Tuesday December 19th, 2006

Amazon To Enter Crowded Download Market With MP3 Only Store

Late last week Amazon began circulating contracts to labels aiming for a late 1st Q '07 music downloadAmazon_12 store launch.  Rumors of an Amazon entry have been circulating all year, but died down as attention shifted first to the URGE launch and then to Microsoft's ZUNE.

What is most surprising (and exciting) about Amazon's new store is that the online giant is apparently telling labels that they will only sell DRM free mp3's and will offer variable pricing.

Playfor_sure As the first major download store launch since Microsoft made it clear with ZUNE that it was not supporting it's own PlayForSure DRM, perhaps Amazon was left with no choice. Yahoo! Music, Napster, URGE and others based on PlayForSure are starting to look like forgotten step-children.  Only eMusic has gained real momentum against the iTunes juggarnaut and eMusic sells mp3's.

Plus by embracing mp3's, Amazon completely avoids all player compatibility issues by selling in the only format that plays on all devices including the ubiquitous iPod.

Emusic_5 I nsiders began to wonder if Amazon was plotting a new course when it hired former Dimensional staffer Scott Ambrose Reilly. Known in the industry as Bullethead for hisOrchard_18 distinctive scalp, he was responsible for many of the early deals made by Dimensional owned eMusic and The Orchard.  The recent label approaches seem to confirm that Ambrose Reilly is at least partially behind Amazon's bold moves.

It is unclear what major label product will be included at Amazon's launch.  It may well be limited to a broadening of the selective experiments we've seen in recent weeks plus perhaps some Insoundlogotop_1older catalog.  Most indies will probably jump on board since many are already offering mp3's via eMusic and the new Insound mp3 album-only store.

Itunes_girl_2 Amazon has also given both major and indie labels something they've been demanding from iTunes but not getting - variable pricing.  How well labels support Amazon could either force Apple's hand or allow it to remain dominate.

COMING THIS WEEK @ HYPEBOT: Will Amazon effect eMusic?  How will other download services react? What about the major labels? IS 2007 THE YEAR OF THE MP3?