[kman42]

At first glance, I thought the positive reviews of Amazon's new MP3 service would be great for the digital music space since it would provide competition to Apple and spur them to innovate. After all, this is how competition normally works. In the very short term it may have that effect, but on second thought, I think this development will be terrible for music consumers in just a few short years.

Amazon is indeed providing competition in the digital music space, but in the wrong arena to benefit consumers. Apple has come very close to breaking the backs of the large music companies and has provided huge benefits to consumers in just a few short years. For instance, consumers got a compelling and user-friendly service for purchasing music. Consumers can buy individual songs and leave behind the crap album-filler. And recently, Apple has forced the hand of the RIAA with the selling of DRM-free music. Apple was able to accomplish this feat because there was finally someone in the business with power approaching the level wielded by the recording industry. But that is about to change.

The music companies will give Amazon rights to DRM-free music and let them sell it for less than Apple ($0.99 vs $1.29). This will draw customers to Amazon and away from Apple. As Amazon becomes a viable competitor to Apple on the distribution level, the RIAA will begin to play them against one another in contract negotiations. This puts the recording industry back into the driver's seat.

In a few years, if Amazon becomes a viable competitor to iTunes, the RIAA will start to force whole albums on us at higher prices and may even re-institute DRM.

kman

[analogika]

Originally Posted by kman42 

This puts the recording industry back into the driver's seat.

That is exactly why this is happening.

The clue here is Amazon's pricing structure, which doesn't really jive with the labels' insistence that Apple allow them to set higher prices for individual songs.

[Mastrap]

Amazon is trying to become the universal internet grocer. To this end they are taking on everybody from ebay to Apple to paypal. As long as amazon gets a cut, they'll sell (or allow third parties to sell through them) pretty much anything.

I don't entirely share your concerns re the redistribution of power back to the record labels. Once DRM free music at a lower price become the norm it will be very hard for anybody to reverse that trend. Remember, companies can only sell what customers are prepared to buy. And if amazon and Apple present a united front to the music industry then that's potentially a very good thing.

[wallinbl]

The only thing that would be bad for consumers would be exclusive contracts. Exclusive contracts just make it hard to find things.

[scottiB]

I read this quote from TerrinB on AppleInsider's boards.

You guys need to wise up. Amazon is selling its soul to compete with Apple. Universal's goal is to destroy Apple so it can charge whatever it wants and give you the music in whatever format it wants. Business as usual. To achieve this goal, Universal is willing to take a hit now by giving Amazon better rates and a better selection of DRM free music then Apple. Moreover, Universal has said it is experimenting with DRM free music for only a six month period. Finally, there is no competition, as Universal isn't given Apple any DRM Free access to it music.

Here's a link to Ars that he cited.

A link to a Business 2.0 blog "Amazon vs. Apple: Why Are the Songs So Cheap?"

Interesting quote:

The self-created headache for the industry is that the highly popular iPod and new iPhone only play music protected by Apple's proprietary FairPlay DRM solution or music that isn't protected at all. And Apple chairman Steve Jobs has repeatedly balked at licensing FairPlay for use on competing download services or devices.

That meant music companies had to choose between using iTunes or going DRM-free. The industry stood by and allowed most of its music-download sales to come from Apple. Recognizing opportunities lost to Apple's dominance, the music industry is moving toward throwing DRM overboard in a bid to open up new retail markets and promotional opportunities.

And...

One last thought, again from Kravets' Wired.com piece, quoting Bronfman on how dramatically Apple has disrupted his business:

"Never before in the history of content has the hardware been more valuable than the software," Bronfman said. "You think about the VCR or the video cassette -- the video cassette always had more value than the VCR that you shoved it into. Apple has been able to turn that model on its head." (link to Wired article)

Not sure I believe that Universal is savvy enough in skullduggery to reach reach kman42's possible endgame, but Amazon is not offering "true" competition untill iTMS has the ability to sell the same DRM-less Universal tracks.

[zro]

I doubt Amazon will have the where-with-all to institute DRM without going to WMA. Therefore I have no problem using their service now and quitting cold turkey should DRM be instituted.

The drivers seat is occupied by consumers. Unfortunately, most of them shouldn't be on the road.

[jokell82]

As long as the music stays DRM-free, I don't think it can be bad for consumers at all. In fact, if I see anything on their site I like I will definitely buy it over iTunes now. And if they move to a DRM system, it's back to iTunes for me.

[kman42]

Originally Posted by Mastrap 

And if amazon and Apple present a united front to the music industry then that's potentially a very good thing.

And therein lies the rub. Amazon doesn't really have a history of standing up for consumers (perhaps they just haven't been in the middle of such a fight before). Given the pricing structure on Amazon, it doesn't appear that they really took any principled position against the recording industry. I think they took what the music companies gave them. It seems that the RIAA dictated the terms.

The recording companies want to be the man behind the curtain, so to speak, just as they were when brick and mortar retail stores dominated. They want to be relatively invisible, but dictate the terms of music distribution to their own advantage. That's capitalism and that's fine, except they generally act as an oligopoly, maintaining high prices to the detriment of consumers.

And it now appears that all of Universal's music on Amazon is watermarked.

[peeb]

Originally Posted by kman42 

And it now appears that all of Universal's music on Amazon is watermarked.

Am I wrong in thinking that it is watermarked as Amazon, not with the id of the purchaser? What's wrong with that?

[Cadaver]

Watermarking per-se doesn't bother me... I'm not putting my music files on P2P networks for sharing. But disruptive DRM and treating the customer like a criminal does bother me. "All iPods are repositories for stolen music."

If I buy a piece of music or a movie, I want to be able to play it today on my iPhone, tomorrow on my laptop, the next day on my 106" video projector, the day after that at my friends house... wherever. Hell, I can take a book to my friend's place and read it on his couch. I can take a CD and listen to it on his stereo, I should at least be able to take my (digital) purchase and play it where I want. I paid for it, its mine to do as I please within limit of the law (i.e., not making 10,000 copies for everyone on the P2P).

[Mastrap]

Originally Posted by Cadaver 

Watermarking per-se doesn't bother me... I'm not putting my music files on P2P networks for sharing. But disruptive DRM and treating the customer like a criminal does bother me. "All iPods are repositories for stolen music."

I agree with that. I am a 'content creator' myself and, maybe as a result, I don't steal other people's creations. I still want to be able to do with my music as I wish, within reason.

[DeathMan]

Originally Posted by kman42 

Given the pricing structure on Amazon, it doesn't appear that they really took any principled position against the recording industry. I think they took what the music companies gave them. It seems that the RIAA dictated the terms.

How can you say the music companies hold all the cards when the tracks are CHEAPER through Amazon? You think it was Universal who wanted to sell them cheaper? I think Amazon would have had to explain that they would need to compete on price, since they're not standard digital music retail source, and they can't compete on experience. Amazon is probably also willing to take a smaller margin than Apple.

The watermark issue is moot, since the tracks are supposedly not traceable to the transaction, or the owner (or should I say, licensee).

I would buy any track possible through Amazon before I did through iTunes. And when will I be able to download them directly to my iPhone (should I ever get one).

[Weyland-Yutani]

The watermark can be used to prevent the MP3s being played on participating players.

[analogika]

How?

[peeb]

Well, I suppose you could create a player that would not play these, but there would be little point.

[kman42]

Originally Posted by DeathMan 

How can you say the music companies hold all the cards when the tracks are CHEAPER through Amazon? You think it was Universal who wanted to sell them cheaper? I think Amazon would have had to explain that they would need to compete on price, since they're not standard digital music retail source, and they can't compete on experience. Amazon is probably also willing to take a smaller margin than Apple.

Mind you, I'm just speculating, of course, but they are likely cheaper because the recording industry is giving amazon a deal to break apple's strangehold on the the digital distribution of music. There has been plenty of analysis of Apple's revenue from music sales. As I recall they split 30/70 with the recording industry and absorb all the costs of hosting the music. I could be remembering incorrectly, but I'm pretty sure I've read that they make $.07/song. If that's accurate, then amazon selling for $.10 less implies that they are taking a loss or got a better deal than Apple gets. And I don't think the extra $.30 that apple charges for drm-free music all goes to apple. I would expect that much of that is negotiated in for the profit of EMI. That's all the music companies want right now: two or more competing DISTRIBUTORS so that they can play them against one another and set the terms of sale.

And we all know what happens when the record companies get what they want. As competition among distributors heats up, the recording companies will stop allowing individual songs to be sold and force whole albums down our throats. We will get variable pricing which will allow slow, but subtle increases over time. You only have to look to the history of the recording industry to see how they want to sell music.

I'm not arguing against drm-free music or cheaper songs. I'm just saying that there is clearly something more behind this than amazon beating apple on pricing. There is a reason they can beat them on pricing and I think it lies in the deals the record companies struck with each and there is a reason the record companies made those deals to the benefit of amazon. And in the long run, competition among digital music distributors does not benefit consumers because the distributors will not be setting the terms; the record companies will be. While we may see differential pricing between digital distribution companies like apple and amazon right now, they will all have the exact same pricing and terms in a few years when the music industry regains control.

It boils down to a short term gain for consumers vs a long term loss.

kman

[lpkmckenna]

AmazonMP3 is not bad for competition or Apple. Frankly, I don't see how this move returns control to the labels at all. Apple isn't likely reverse its stand on per-track sales or pricing because of competition.

[Weyland-Yutani]

Originally Posted by peeb 

Well, I suppose you could create a player that would not play these,

Easily.

However, if the above information is reliable, then this watermark on the Amazon MP3s is not traceable to a purchase or a specific person, unlike the iTunes Plus watermark.

Weyland-Yutani approves of Apple's approach with the more traceable watermarks.

[subego]

Not surprising the RIAA hasn't figured this out yet.

Apple didn't beat them, P2P beat them.

No matter how tight of a squeeze they get on the distribution channels, they will always have to compete with their own product for free.