Borders May Add MP3 Downloads. Amazon Answers

Borders ends its online sales relationship with Amazon in April and is
exploring the addition of a download an mp3 only download store to its new online offering. Currently the book and music chain is testing "mix and
burn," with in-store customers creating their own
CDs.

"We know that the customer is downloading music," Border’s EVP Robert Gruen told WebProNews. "We’re
looking at how do we incorporate that into the whole process."

With downloads now universally compatible and the cost of market entry falling, expect more retailers and others to extend their brands with music stores.  Some will be the kind of broad offerings that Borders is mulling. Others will serve more niche markets. 

Amazon’s answer to all of this competition?  We hear they are in talks with a myriad of partners who want to use Amazon to sell music. The online retailer already has a  hugely successful affiliate program that it has extended to include downloads.