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Report: Amazon Tunes Into Music Downloads

Can the company that revolutionized book selling and set the standard for e-commerce hit a high note in subscription music? Maybe, although some think there may be a few sour notes.

Online marketer Amazon hopes to expand its vast portfolio of services beyond books, apparel, music CDs, videos and almost everything else under the consumer sun into the digital music business.

According to a report in the Wall Street Journal, Amazon is discussing projects with some of the top global music companies, with the goal of offering Amazon-branded music players and a music download subscription service.

The service could be available as early as this summer, barring any unexpected difficulties in negotiations with key music distributors, including Vivendi Universal SA's Universal Music Group; Sony BMG and Bertelsmann AG; Warner Music Group; and EMI Group, according to the report.

Amazon could not be reached for comment on these plans. A spokesperson for the Warner Music Group declined to comment.

If the deal does go through, it will be the first time Amazon will market its own branded player, according to the Journal report.

Offering a private-branded device, as well as subscription access to a library of downloadable music, is viewed as critical to differentiating Amazon from a symphony of players in the digital music market, Gavin Robertson, founder and CEO of MD Flowphonics, a digital rights management and copyright tracking company based in Glasgow, Scotland, told internetnews.com.

Many of the dominant download services in the music market do not offer an all-you-can-eat subscription service, but sell individual songs for use on players, or sliced-and-diced music tracks that are often used as ring tones on cell phones.

These include such heavyweights as Microsoft, Yahoo, Napster and Google -- all of which have obviously noticed the substantial success that Apple has had with its iPod players and iTunes music download service.

Apple last year extended its own hardware platform by licensing its iTunes software for use on Motorola's Rokr cell phone, which was offered through Cingular Wireless in the United States.

The phone, which was the first to feature built-in iTunes, met with a lukewarm response by consumers, apparently due to its limited memory capacity. However, this limitation was deliberate, because Apple did not want to support a device that might impact sales of its own iPod devices, said sources.

Online and wireless music services will continue to grow worldwide, and may ultimately be the leading source of mobile music downloads, according to market researcher IDC.

The U.S. wireless full-track music market is expected to surge to $1.2 billion in revenue and include more than 50 million full-track customers and subscribers by 2009, IDC said.

People who are a bit lower on the scale in the music industry may not be too enthusiastic about yet another generic music download service, especially one that is based on a subscription model.

"With a large-scale, subscription-based system, using proprietary equipment, Amazon could virtually shut-off independents from flourishing," Kent Courtney, a musician who began offering his songs as music downloads in 1999, told internetnews.com. "Without independents feeding the creativity that is required for music to be really fresh, you have stale airwaves."

Courtney, who now operates Living History Music in Hanover, Penn., said that many types of music are not available on iTunes.

"This entire system of recycling old sounds can be fed by Amazon's potential client base of 55 million to the detriment of new music in general -- especially with a subscription-based system on proprietary hardware," he said. "You lock out the independents."

While brand loyalty has certainly hit the right chord for Apple and its iPod, which has achieved near-icon status, there are some people who also feel that device private-labeling may not be a sustainable differentiator for others entering the market like Amazon.

"The branding of devices is likely to be short-term and not a core profit center," MD Flowphonics's Robertson said. "But I think Amazon could provide a formidable new entry to the online music market, and their experience in foreign markets could be of huge value."

Robertson has first-hand experience in digital rights management and the complex copyrights and contracts, because one of his company's clients is Apple, which subscribes to the service to keep track of the complex web of contracts associated with every commercially available piece of music.

Nonetheless, Amazon could create some serious competition because of a competitive hole in the market and its own brand recognition.

"ITunes has a dominant market in the cross-over model of outright purchase in digital sales," Robertson said. But, "they are holding off from subscription services."

While podcasting will eventually take the company into that space, there is now an opportunity for companies like Amazon to come in and launch services that could capture some market share, he said.

"They've embraced the detached environment of electronic delivery", said Robertson. "Many of these people also use Amazon, and it seems an obvious market for Amazon to chase and profit from."