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Will Amazon be the iTunes killer?

Marketplace Staff Dec 7, 2007
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Will Amazon be the iTunes killer?

Marketplace Staff Dec 7, 2007
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TEXT OF INTERVIEW

Doug Krizner: Remember the 1988 Pepsi commercial featuring Michael Jackson? The company has a track record of teaming with the music business. And now, Pepsi will be lending its fizz to Amazon.com for a big promotion in the coming year. It’s a massive digital music giveaway.

Let’s bring in Bill Werde, he’s executive editor of Billboard. Bill, is this really a big deal?

Bill Werde: Yeah, I think so. In the context of digital music, you know, Apple still has about 70 percent of the market share. By partnering with Pepsi and really trumpeting this during the Super Bowl, what Amazon is ultimately up to is getting itself in a real way onto the playing field with Apple.

Krizner: Now as I understand it, these songs are going to be formatted in mp3, which means that they’re inherently unprotected. Is that going to be a big issue?

Werde: Well, it has been and continues to be a pretty big issue for the major labels. So if Warner Music Group and Sony BMG want to play ball and benefit from the attention and ultimately the sales that this Amazon move will probably yield, they’re going to need to strip DRM, digital rights management, from their music.

Krizner: How much competition do you think Amazon can be for iTunes?

Werde: That’s kind of the million-dollar question. Every year, there’s a slew of stories that you know, finally, it’s the iPod killer, it’s the iTunes killer, you know, this is the one that’s going to do this. Amazon I think is probably the best-position competitor yet. I say that because one, they have a lot of people going to that site already specifically to buy music. And the other thing that makes them interesting is I think that there’s a growing awareness amongst music fans that if they buy music on iTunes, it will play on the iPod, but if they want to go to a different player, it may not necessarily work on that.

Krizner: So in this promotion, how much are they going to be giving away?

Werde: What Billboard has learned is as many as a billion tracks. I think the interesting to note is that if you look at a reasonable rate of redemption on a promotion like this, you’re talking about anywhere from like 200-300 million tracks redeemed. And that is a third of all tracks that were sold this year. The real thing to watch here is whether Warner Music Group and Sony BMG are willing to blink for the sake of a lot of sales. Behind the scenes, there’s definitely a negotiated rate that is going to Amazon and is going to the record labels, and that’s on Pepsi’s dime.

Krizner: Bill Werde is executive editor at Billboard. If you want to read more about what Bill and his colleagues are up to, go to Billboard.bz. Bill, thanks so much for speaking with us.

Werde: Take care.

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