Amazon.com tries to take another bite out of Apple by adding Warner music

Amazon.com expanded its online music catalog today by announcing a deal to sell downloaded music from Warner Music Group without the digital rights management, or DRM, technology that prevents consumers from sharing music and playing it on any device. Warner is the third of the four major music labels to allow downloads DRM-free on AmazonMP3.com, putting Amazon in a stronger position to challenge market leader Apple Inc. and its online store iTunes.

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“Apple has become the third-largest music retailer in the United States and is still growing. The music industry cannot afford to let Apple get that powerful and so must sell MP3 music without DRM as a way to encourage the growth of other music stores like Amazon so there can be a healthy online music business,” says James McQuivey, an analyst for Forrester Research who covers the digital music industry. ITunes sells DRM-protected music, but because those files can be played on Apple’s popular iPod MP3 player consumers continue to patronize iTunes. Apple is No. 15 in the Internet Retailer Top 500 Guide.

“Consumers have made it clear that they want easy access to music. MP3 music that is free of DRM enables consumers to listen to music on any music device they have, exactly how the cassette tape and the CD used to work,” says McQuivey. “From this moment on, every non-Apple MP3 player in the market is now 33% more useful than it was just yesterday.”

When Amazon which is No. 1 in the Internet Retailer Top 500 Guide, launched its online music store in September, more than 2 million digital songs were available from 180,000 artists including those from two of the four major music labels – EMI and Universal. With the Warner announcement, there are now more than 2.9 million songs available.

Sony BMG is the only major music label to not allow DRM-free downloads, but it may have to jump in as the digital music market continues to grow. In a report due to be released next month, Forrester Research forecasts the market to grow from $1.7 billion in 2007 to $4.8 billion in 2012.