Amazon 2, Apple 0

So when did Amazon.com (Nasdaq: AMZN  ) and Apple (Nasdaq: AAPL  ) stop being friends? Sure, maybe they were never the best of buds, but at least Apple was able to count on Amazon to sell a ton of iPods and Macs.

Amazon still sells those popular items. But you've probably heard that it's also selling the NBC primetime shows that are no longer available through Apple's iTunes video store. And now Amazon is selling digital music as well.

The e-tailing giant rolled out its long-anticipated MP3 store yesterday. With the actual MP3 files it sells, unshackled from digital rights management (DRM) software, buyers can freely burn copies, transfer the tracks to portable devices, and play them on any digital music player.

The MP3 songs start at $0.89 apiece, less than the $0.99 rate that Apple goes with for its iPod-tethered tracks, or the $1.29 price tag that Apple charges for its own DRM-free files.

Think e-different
Until now, Apple hasn't had a whole lot of competition for legal downloads. Music-subscription services such as Napster (Nasdaq: NAPS  ) and RealNetworks' (Nasdaq: RNWK  ) Rhapsody have sold singles on the side of their monthly aural buffets. Audible (Nasdaq: ADBL  ) , too, has drawn a line in the sand when it comes to its dominance in the niche of spoken content.

Apple has clearly thrived while swatting away the featherweights. It hasn't exactly been quaking in its iBoots. However, the game is changing now that the world's largest retailer, Wal-Mart (NYSE: WMT  ) , and the country's most popular Internet retailer, Amazon, are both pitching MP3s.

The marketplace never made a whole lot of sense until now. You had Apple selling iPod tracks, and nearly everybody else selling WMA-protected tracks for most non-Apple digital players. Now that freshly unshackled MP3 files are on the market, the playing field is truly level.

Even if Apple fans believe that Wal-Mart's launch last month is inconsequential, they have to worry about Amazon. Just step into Amazon's virtual storefront, and you'll see that the intuitive interface knows you better than you know yourself. It will recommend items based on past purchases, or what others like you are buying now.

Amazon sold $10.7 billion worth of merchandise last year -- $7.1 billion in the form of media -- but at issue here is more than just respect for Amazon's girth. Amazon is a trusted source in music. Now it also happens to offer the better deal.

If you have a choice of paying $0.89 on Amazon for a higher-quality track with no DRM, or $0.99 for a lower-quality track with portability restrictions, where will you turn?    

Thinking outside the Unbox
A cynic would point out that Amazon's had a tough time selling digital video. Well, so has Apple. I'm not talking about those tiny iPod video files. I'm talking about AppleTV, a rare dud in the Apple family portrait these days.

Yes, both Apple and Amazon have had a tough time with the convergence of online video and home-theater entertainment. But music is different. The files are smaller. Music is easier to transfer. There's a wider variety of available content. Sure, not every music studio is enamored with the idea of putting out commercial MP3 files -- only EMI and Universal, along with numerous independent labels, participate in Amazon's DRM-free sales thus far -- but Amazon's library is still pretty impressive, with 180,000 different artists offering up 2 million songs.

Apple has to be careful here, because as personal music libraries widen with free-roaming MP3 files, a cheaper SanDisk (Nasdaq: SNDK  ) flash media player starts to become more feasible for a lot of consumers.

I'm no dummy. I realize that Apple is way ahead of the pack in design and brand cachet. That will protect Apple in the near term. However, anyone who believes that Apple will maintain its gargantuan share of the digital-music world in a year or two has been resting on the mute button for too long.

Amazon's here, and it always plays to a decent-sized audience. 

Other hits on the Amazon playlist:


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