Sony BMG deal gives Amazon an advantage
Deal makes Amazon only place to buy DRM-free from four major labels.
NEW YORK -- Sony BMG Music Entertainment SNE said Thursday that it has agreed to sell digital downloads of its tunes without copy protections on Amazon.com, AMZN giving the online retailer a boost in its effort to overtake Apple's aapl iTunes.
Later this month, when Amazon begins to sell Sony BMG tunes, it will be the only place consumers can buy songs from all four major music companies as MP3 files free of digital rights management (DRM) restrictions.
That gives Amazon a leg up on iTunes in reaching consumers who want songs that can be copied and will work on virtually any computer or portable player including, but not limited to, Apple's iPods. Amazon already had deals with Universal Music, Warner Music and EMI to offer their songs DRM-free. Only EMI music is available that way on iTunes.
It is Sony BMG's "newest element of our ongoing campaign to bring our music to fans wherever they happen to be," Thomas Hesse, president of global digital business and U.S. sales, said in a statement.
The deal adds up to 200,000 Sony BMG songs to Amazon's nearly 3.3 million inventory. Sony BMG hitmakers include Avril Lavigne, Jennifer Lopez, Bruce Springsteen, Carrie Underwood, Bob Dylan, Kenny Chesney, Daughtry, Britney Spears and Barry Manilow.
Bill Carr, Amazon vice president for digital music, says, "It'll be great for our customers who have already expressed great enthusiasm for our service. This will make it that much better for them."
Amazon says that it sells about half of its songs, including most of the 100 best sellers, for 89 cents each.
But while iTunes charges 99 cents for virtually all tunes, with or without DRM, Amazon lets companies put different prices on different recordings. Most tunes sell for 89 cents to 99 cents. Amazon's flexible pricing has attracted music companies, which have chafed at iTunes' rigidity.
Amazon and Sony BMG declined to discuss pricing for the new songs.
Sony BMG first demonstrated its willingness to sell digital downloads without DRM this week. It announced a plan to sell in stores cards, similar to gift cards, that let buyers download DRM-free albums.
That decision and the Amazon pact are a remarkable turnaround for the No. 2 music company.
Until recently, it tried to rally the music industry to fight online piracy by offering digital downloads only in formats that couldn't be easily or endlessly copied. Sony BMG angered many consumers in 2005 with a short-lived effort to add anti-copy software to its CDs.
Companies changed their tune as retailers continued to cut floor space for CDs and as piracy continued unabated. Sales of albums and their digital equivalents fell 9.5% in 2007, to 585 million, according to Nielsen SoundScan.
The rapid growth of digital downloads, up 45% last year to 844 million tracks, prompted Amazon to launch its online music service in September.
The next hurdle for Amazon is to cut deals with myriad independent companies that accounted for 14.8% of all digital tracks sold last year.
"The list of independent labels is very long," Carr says. "We already have tens of thousands of them. It's a rather involved process to add them. We've actually licensed more content than is available on our website."