In the already crowded digital-downloading space, Amazon.com (NASDAQ:AMZN) is apparently gearing up to make its presence felt over the next few months. According to an entry in the Hypebot blog, the new store will set itself apart from rival offerings by selling MP3 files that are free of any digital rights management (DRM) shackles and that give labels the option for variable pricing.
Despite Amazon's girth in all things e-commerce, it will be a challenging venture. Talking the major labels into serving up DRM-free tracks will be great for music fans who want the freedom to port their purchases everywhere, but it may come at the expense of sites with tighter controls on how music is distributed. Good riddance, you say? Perhaps, but it may also keep labels from offering up the newer, better-selling titles that the prerecorded-music industry is more protective about when it comes to file-sharing piracy.
Variable pricing also sounds like a great departure from the $0.99 a track that Apple (NASDAQ:AAPL) pitches in its iTunes store, but it's also a can opener in hot pursuit of canned worms. Yes, it's ludicrous that a hot single should be priced the same as some forgettable throwaway track near the end of a CD, but does the industry need a pricing war? If Warner Music Group (NYSE:WMG) decides to move digital product by going from $0.89 a track to $0.69 a track, will the competition have to follow suit? In the inventory-free world of digital distribution, with Amazon bearing the brunt of distribution, price wars can ignite with the simplest of knee-jerk reactions.
Does this mean I am weary of Amazon's approach? Yes. Does that mean I think it's a bad idea? No way, my friend. Amazon is late to the game, and it had to bring something new to the table beyond its huge database of trusting customers. After what seems to be a rather tepid market reaction to its Unbox digital video service, Amazon has to be more concerned with winning over consumers than merchants at this juncture, and going DRM-free and offering variable pricing will win it some vocal cheerleaders.
Even the established sites like Napster (NASDAQ:NAPS), eMusic, and RealNetworks' (NASDAQ:RNWK) Rhapsody can use a little kick in the pants from a proven giant that is willing to give the consumers what they want. Let's hope that my fears don't come true -- with consumers regretting what they wished for, thanks to slim pickings on the selection front and variable pricing that takes hot tracks over the buck mark.
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Longtime Fool contributor Rick Munarriz once had his band signed to Sony's Columbia Records label. It didn't exactly pan out. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. T he Fool has a disclosure policy.
