Amazon.com Inc., with its millions of music customers and strong sales of MP3 players, is the best bet to launch a digital music store that takes market share from digital music leader Apple Inc.’s iTunes, says Forrester Research analyst James McQuivey. Sony, meanwhile, is phasing out its Connect digital music service as it opens its Walkman media players to the Windows format.
“Amazon is the one horse that the music industry should bet on as an alternative to iTunes,” McQuivey says, noting that Amazon has said it plans to launch a digital music store “soon.” An Amazon spokesman declines to confirm the retailer’s plans for digital music, though reports in two New York newspapers have cited a mid-September launch.
“The industry has been searching for a way to create more competition online,” McQuivey adds, noting that iTunes accounts for 20% of all music sold in the U.S. “All Amazon has to do is offer MP3 player buyers some music or pitch digital music to people shopping for CDs, and you have the makings of a strong business.” Amazon is No. 1 in the Internet Retailer Top 500 Guide.
McQuivey cautions, however, that Amazon can succeed only if it can offer enough popular music content, requiring it to get the cooperation of major music labels to offer music free of digital rights management restrictions.
Sony, No. 9 in the Internet Retailer Top 500 Guide, announced last week that, beginning next March, it will begin phasing out its Connect digital music store, located at Connect.com. The phase-out of Connect coincides with Sony’s launch last week of two new Walkman media players designed on a platform that supports Windows Media Audio, MP3 and AAC music formats.
Sony hasn’t been able to build a strong direct download digital music market with its older Walkmans, which were based on Sony’s proprietary ATRAC audio format, McQuivey says. “Sony hasn’t been able to gain the momentum Apple did because its proprietary devices weren’t as compelling as Apple’s,” he says. “When you have a proprietary music format, the only people who will use it are those who buy your proprietary device. And when your device isn’t the hippest one in the market, you have no hope of building a robust store.”
Sony has no plans to discontinue its Connect e-book service, the company says.
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