Part 2: Is Amazon’s Music Strategy Stalled?

PART 2 – Yesterday we reported that Amazon’s possible purchase of eMusic appeared stalled and its long rumored download store had failed to open.

As Amazon has expanded into everything from electronics to groceries,
they’re admirable credo has been that if they can’t do it
better; they won’t do it at all.  But in the rapidly evolving digital
music landscape
this philosophy has left the company looking like
Blockbuster trying to catch up to Netflix.

Various sources tell us that Amazon still has every intention of opening an mp3 only download store perhaps as early as May or June.  Many top indie labels are already on board with others close to signing.  EMI says it’s talking to all of the major services; so its hard to believe that Amazon is not also on the list.

But how can Amazon differentiate itself in this crowded sector still dominated by iTunes?

• 
  Be the first major U.S. store to sell EMI in the mp3 format.  It appears that Zune will be next in line after iTunes with DRM free EMI product, but neither service uses the mp3 format. Whatever size advance check Amazon has to write is worth it.  They’ll get it back eventually and first with mp3’s sends a strong statement.
• Offer labels and consumers variable pricing.  Apple slyly just got into the pricing game by offering  EMI tracks DRM free at a higher price. That strategy is probably not going to lead to a jump in downloads, but why shouldn’t some songs or bundles costs more and others less?  And wouldn’t an label netting 15 cents a track from eMusic for that old Joy Division track love to net 25 cents from Amazon?
• 
  Offer multiple formats.  The label won’t let you sell it as an mp3?  Sell it as a DRM protected WMA file. The UK’s 7Digital and indiestore are already doing it with great success. It’s called giving people what they want…or at least what the labels will let you give them.
• Amazon is already the biggest and probably the best music CD seller on
  the net. Why not sell CD’s alongside downloads?  They’ve got the product in the warehouse…and amazingly no other download service does it.
• 
  Enable over-the-air downloads. The majority of paid downloads in Asia already happen via the cell and the U.S. could follow that trend. Amazon should partner with another company if they need to.

By choosing to sell only DRM free mp3’s, Amazon has smartly eliminated the compatibility issues plaguing the competition and differentiated its new offering. It is likely, however, that no download store will really compete with iTunes until most major label product is available as mp3’s; and by then iTunes will be selling it too.

But if Amazon can combine some additional creative strategies alongside with their trusted brand and legendary customization, they should be a very powerful competitor.