Amazon in digital music: let's hope they have some new ideas

Tags: Music, Apple, Napster, Microsoft, Marketing, Amazon,

Today's Wall Street Journal notes that Amazon.com might offer digital music by Christmas. We have great respect for Amazon doing a great job in retail environments where there is a serious case of the Tyranny Of Too Much. Forrester's Josh Bernoff agrees.

Josh Bernoff, an analyst at market-research firm Forrester Research Inc., said he wouldn't expect Amazon to have a big impact immediately. But Mr. Bernoff said Amazon has managed to differentiate its offerings in other highly competitive markets, such as selling compact discs. "They are particularly good in environments where there are thousands of other choices," he said.

But as we've noted previously, the odds are against this working if they elect to build a me-too store based upon Microsoft's Janus digital rights management technology. After all, it's not like there's any shortage of those types of services: you can already choose from Napster, WalMart, Yahoo, Virgin, and a host of others. We don't think they can create enough differentiation to overcome Janus's limitations, namely that it doesn't support iPods, is flakey (despite Microsoft's Plays For Sure initiative, which should be renamed Pays For Sure regardless of whether it plays), and is tied to Windows Media Player only. While it may serve to hedge against a decline in Amazon's CD business as digital music takes hold, we don't think Apple's iTunes yet has much to fear unless Amazon has some clever new twist up its sleeve to address these issues and give it an edge.