Analysis: Amazon Mp3 Service Threatens iTunes and iPod

mp3-storefront-logo_v29364269_.jpg

If you follow Apple for long enough, you’ll see a million toothless iTunes and iPod killers, overhyped services and products destined for obscurity or the remainder table. But though Amazon’s new mp3 downloading service seems like another in this chain, I firmly believe this time is different. Amazon can actually deliver a superior digital music experience. Apple has its first legitimate challenger since the iTunes Store first launched. To hear why, click through.

Why is AmazonMp3 different than the new Napster, Rhapsody, FUSE,  MTV and Walmart’s forays into music downloads? Because its music will play on iPods. And Zunes. And BlackBerrys. And Zens. And even the original MP3Man.  It’s as flexible and free as the CDs that I bought at the store on Saturday. And that’s better than iTunes.

AmazonMp3 could have broader appeal than eMusic, because they already have both EMI and Universal on-board to deliver DRM-free Mp3s, and eMusic only has the independent labels.  It’s better than iTunes plus, because the downloads are cheaper and the tracks don’t include iTunes profile information. It’s just music.

Most importantly, the AmazonMp3 experience is nice and easy. Using a tiny application, the Amazon Mp3 Downloader, your music comes in and heads over to your favorite library application, be it iTunes or <sob> Windows Media Player. Once the music is in iTunes, the experience is as good as buying from iTunes, right down to the album artwork and the integration with the iPod.

And if you want to sync with a player other than an iPod? You can. Interestingly, this is both the biggest attack on the iPod’s dominance since the product first launched. But it could also deflate one of the biggest arguments Apple critics bring to bear whenever slamming the Cupertino company’s policies. If Amazon music really takes off and people are free to use whichever media player they choose and iPod marketshare goes up? Well, then it means people are just sticking with a product they like — not because they’re “trapped” into a form of DRM that burdens them.

I’ve already played with the Amazon store, and though it’s not perfect yet (EMI and Universal are quite far from owning every record label in the world), it’s incredibly mature this early in. Amazon came correct. Now it will be up to Apple to respond. This time, I hope they take the advice of Wil Shipley and make a decision that’s good for average people — not good for Apple and media conglomerates. This is really going to get good.

  • coljac

    This is a great offering from Amazon. I already purchased a track just as a vote of confidence. I hope it does really well and helps get the message through the thick skulls of the record labels that we want lots of cheap DRM free music and we’ll gladly pay for it.

  • Joseph

    The title says Amazon’s new service threatens the iPod, yet there’s no explanation of why that is.

    People are already free to use whichever media player they choose. Less than 3% of the average user’s iPod content is DRM’d with Apple’s Fairplay. The argument that users are “locked-in” to the iPod because of the measly 20 (or whatever) lousy Fairplay DRM’d songs they bought at the iTunes Store is really silly, and needs to be disproved about as much as intelligent design needs to be disproved.

    People use the iPod + iTunes (not the store but the music management software) combo because they like it. They will stop using it when another company offers them something better. That something better means a better player + media management system. The retail part of iTunes makes up only a tiny portion of Apple’s profit and has very little to do with Apple’s current success. A better MP3 store will compete with the iTunes Store, but it will otherwise leave the iPod + iTunes unaffected. If you’re not convinced of this, just realize that most users of Amazon’s new service will continue to manage their new purchases through iTunes and listen to them via an iPod.

    The interesting thing about Amazon’s new service is that it is a sign that the music labels may be ready to stop crying about the realities of dealing with strong retailers, and start focusing on offering a better value to consumers. If Amazon’s new store succeeds – and I hope it does – it will create some real competition, which will probably mean lower prices, since there’ll be 2 retailers putting pricing pressure on the music labels instead of just 1.

  • Repsode

    I’ll kinda agree with Joseph on the rather broad definitions you’re using in the headline but that could end up way off topic. As you say in the article one of the main reasons AmazonMp3 could work is it’s hardware agnostic status.

    From some of the accounts I’ve hear on the service, it sounds pretty damn good. Cheaper, DRM-free, can be used with any media program or mp3 player and a “Preview all” opition for albums sounds good to me . Some search irrelevencies and so on but that can be fixed easily coming out of beta.

    While I like using the iTunes store for the occasional single, it’s nice to to have other options.

  • Doug S.

    I can see the argument that true DRM-free music threatens iPod’s market dominance because, given an absolutely free choice in hardware, some people will go for cheaper alternatives like the Sansa or (God help them) the Zune. There are, after all, enough dumb people in the world…. :-)

    However, I don’t quite buy it. I agree with Joseph in that I think Pete overstates the extent to which the iTunes store enforces loyalty to iPod. I’ve been a happy iPod user for 2 years (the only MP3 player I’ve ever had) without buying anything from iTunes (everything is ripped from CD). I just like the iPod and how the iTunes client integrates so smoothly with my Mac. I’ll keep using iPod for the forseeable future, even though Amazon’s store looks pretty good and I’ll probably buy stuff from them in the future. If Joseph’s stats are right, I’m not entirely unique.

    My own analysis hinges on two points:

    1) Apple has the record labels by one arm and is twisting it behind their back, and the labels are trying to fight back with the other. The fact that they were willing to abandon DRM is a sign of their desperation. To some extent, Amazon is allowing themselves to be used as a proxy. And of course Apple is threatened, because there are always dangers in a knife fight. But Mr. Steven Jobs is a tough in-fighter himself.

    2) It could also be argued that the net effect of Amazon’s DRM-free store is that it will expand the market for downloadable music in absolute terms, and thereby help iPod. Perhaps Apple’s keen sense of industrial design and the cachet it gives to Apple products is the iPod’s strongest advantage, rather than the link with the iTunes store? A larger market for music downloads — more people buying more of their music through downloads — should therefore help sell more iPods.

  • BdeRWest

    “The title says Amazon’s new service threatens the iPod, yet there’s no explanation of why that is.”

    Mabye Pete meant it threatens the iTunes/iPod business model. Sure, iPods play other things than Apple’s Fairplay DRM, but the optimal way to go about using the device is to buy tracks from iTunes, and have them automatically load onto the iPod.

    Yes, the Amazon service actually plays nice with iTunes (am I the only one dumbstruck by this?), but it still creates two copies of files. It doesn’t “just work” in the way that photo and video management “just work” in iLife. It works very well, but, if you want to conserve space, there is still some user-side file manipulation. And we all know how much Apple hates user-side file manipulation

  • Meat

    It has one major drawback compared to the iTunes store: Doesn’t work outside the US. Yet. Amazon won’t let me register a Swedish adress as a billing adress. Here’s to hoping they work that one out soon.

  • David

    iTunes simply can’t rule forever. True competition was inevitable and will be a good thing for consumers, including the Apple & iPod loyalists. I don’t think it will be much of a threat to iPod the device; but if Amazon should partner with another audio player manufacturer it could get interesting.

  • Pete Mortensen

    My larger point, guys, is that this provides a real test. Critics claim the iPod is only popular because people have their music locked into iTunes. Now that a legitimate alternative to open up all of those files exist, will it change the market for Mp3 hardware? If not, the monopolistic practices aren’t the story. Which means two things: 1. iPods rule. 2. Apple should stop locking everything down so tightly!

  • Doug S.

    Pete, I agree that this is the strongest challenge to iTunes that we’ve seen yet. But I really do think that the claim that iPod owes all of its popularity to its link to the iTunes store has always been demonstrably wrong. So I’ve never taken it seriously to begin with.

    I still think that the likeliest scenario is that this by itself does not cause a dramatic change in iPod’s market position. And that it’s quite possible that this will benefit iPod by making downloaded music in general more attractive to a broader audience.

  • Mike S.

    I owned two or three MP3 players before the iPod shipped and none of them worked. I ordered my iPod the day it was announced and have never looked back. iPod + iTunes dominates the market because it was the first digital music player that had an integrated desktop management system designed in from conception. Put simply: it works. Without a lot of pain and tears or fuss and bother. It simply works and it works simply.

    Amazon’s MP3 store may challenge the iTunes Music Store but it will only reinforce the iPod’s hold on the music player market.

About the author

Pete Mortensen

Pete Mortensen is a design strategist for consulting firm Jump Associates and the co-author of Wired to Care: How Companies Prosper When They Create Widespread Empathy, a book and blog that are significantly more interesting than you might initially think. Pete's particular Apple avocations are both around design--interface and industrial. Follow him on Twitter!

(sorry, you need Javascript to see this e-mail address)| Read more posts by .

Posted in iTunes |