HITS Daily Double
"Opening up the market so that other retailers can compete with Apple, and create different experiences that consumers can enjoy, is important.”
—-Amanda Marks, UMGD EVP/GM


Online Retailer Off to Big Start With Download Store, Industry Hoping for Apple Competition
A special Rerap report by HITS' Retail Editor Mark Pearson

The new Amazon MP3 digital store has only been open for a week or so, and although they have yet to produce a sales chart, the early signs are more than encouraging.

And that is great news.

For anyone that has been following the meteoric rise in iTunes marketshare over the last two years, it’s more clear than ever that someone else has to step up to the plate or Apple will become so powerful that no one will ever be able to put a meaningful footprint in the digital space.

If we are to believe the empirical data that the labels are receiving, Amazon’s Jeff Bezos and company have a real shot to live in the brave, new digital world.

This, of course, is tempered by the fact that they only have two of the four music groups, Universal and EMI, because they are selling unwrapped, DRM-free files. But if Amazon starts delivering meaningful sales, it’s hard to believe that Sony BMG and Warner Music Group won't find their way to some sort of unwrapped solution.

Wal-Mart, which started selling digital downloads in December ’03, is currently the second-largest digital retailer, but after almost four years, has only been able to manage a pitiful 2% share. Case in point: Reba McEntire sold tens of thousands of physical CDs through Anderson, less than a hundred of which were digital downloads.

Now you might say that Country fan hasn’t found their computer, but you'd be wrong. iTunes sold almost 20k of Reba first week, and if you listen to Big Champagne’s Joe Fleischer, he'll tell you that Country fan is online and file-trading with everybody else.

So why is Amazon doing something that Wal-Mart has been unable to do? One reason could be that Amazon’s business model has always been online and they come to the digital space already having tens of millions of consumers already signed up with their credit cards. Their search engines are also much more sophisticated and user-friendly.

UMGD EVP/GM Digital Distribution Amanda Marks is understandably excited, but believes that it won’t be enough if they are just shifting marketshare from iTunes.

“However, opening up the market so that other retailers can compete with Apple, and create different experiences that consumers can enjoy, is important,” she says. “And one could assume a more diverse market in terms of marketshare will in and of itself give people the incentive to spend money to market digital music and therefore grow the market.”

Another piece of good news emerging from the Amazon story is that the huge gulf that exists at iTunes between track and full album downloads is said to be much narrower at Amazon. In any case, it’s a heartening development.