Revisiting my Amazon predictions

Now that Amazon has opened a beta version of its MP3 store and everybody else has commented on it (see for example Hypebot’s roundup, as well as good takes from Duke Listens! and Digital Audio Insider) I wanted to revisit my earlier Amazon predictions. So without further ado here’s the scorecard:

  • I predicted variable single track pricing from 60-75 cents for back catalog material, $1 for most material, and $2-3 for hot singles. Amazon instead seems to have opted for a standard price of $0.89, slightly undercutting the iTunes Store price for DRM-protected tracks, and significantly less than the iTunes Store price for DRM-free tracks.
  • I predicted use of a single DRM-free format, namely MP3 at some high bit rate. This was an easy prediction, and I don’t deserve any credit for making it.
  • I predicted that Amazon would offer variable pricing on digital albums, with album prices ranging from $2-3 at the low end to $10 at the high end, with the eventual maximum being in the $5-7 range. Amazon in fact is offering a limited form of variable pricing on digital albums, with most albums being $8.99 (again, slightly undercutting the iTunes Store) but some albums priced under $5. Note that these are true albums, not EPs; for example, Joanna Newsom’s Ys (only five songs, but they’re long ones) is sold for $9.99 at the iTunes Store but is only $4.95 at Amazon MP3. A less extreme example is the Decemberists’ The Crane Wife, a 12-song album that’s $9.99 at the iTunes Store but only $7.99 at Amazon MP3.
  • I also predicted that Amazon would offer a discount on the digital album for people buying the corresponding CDs. This is not the case: If you want both the CD and the digital album you have to buy both separately at the standard prices. As I noted in my post offering such discounts on a regular basis would likely require changes to standard music licensing schemes, so their absence is not surprising.
  • I predicted that Amazon would offer a sort-of-subscription plan with discounts (and/or free tracks) to people willing to commit to volume purchases. This is not part of the initial Amazon offering; Amazon has never offered this for books (to my knowledge), so it’s possible it may never be offered for digital music either. (Amazon does offer club prices for members of the CDNow Preferred Buyer’s Club. As I understand it, this is a function of Amazon’s having taken over operation of CDNow’s store, not an Amazon-native program.)
  • Finally, I predicted that Amazon would leverage its existing technologies to provide two value-added services: backing up music libraries using Amazon S3, and personalized music recommendations using the Mechanical Turk service. Nothing like this is part of the initial MP3 store; in fact, Duke Listens! points out that Amazon currently doesn’t do a very good job of recommending new or future MP3 releases that might be of interest.

Overall I’m a pretty poor predictor, although in my defense I was deliberately trying to be over the top a bit in terms of suggesting things Amazon might do to differentiate itself from existing services.

Some other comments:

  • As some others have commented, putting MP3 in the name of Amazon’s digital music store is an interesting strategy. I agree with others that it advertises the DRM-free nature of the store and puts that front and center. (By contrast, eMusic has gone back and forth on this; some of their ads have put more emphasis on iPod compatibility than on the tracks being DRM-free and in the MP3 format.) I also think that this is a subtle thrust against Apple: It encourages buyers to think of the MP3 format as the standard DRM-free format, and by implication casts the AAC format used by the iTunes Store as being associated with DRM and non-openness. In fact AAC is a perfectly open and standard format, but its use as part of Apple’s proprietary Fairplay DRM scheme has perhaps tainted the format in some people’s eyes vis-a-vis the MP3 format.
  • The Amazon page for a CD has two prominent links (one text link, and one in the sidebar) to the corresponding digital album (if one is available), including a mention of the digital album’s price. However the page for a digital album has only a small text link to the corresponding CD page, with no mention of price. I’m guessing that Amazon wants to promote digital albums as a lower-priced alternative to people unsure about a CD purchase, in the same way that it highlights lower-priced used CDs to people contemplating purchasing a new CD. However Amazon assumes that people buying a digital album have limited interest in a CD—probably a good assumption.
  • The Amazon page for a digital album doesn’t display any of the listener reviews submitted for the corresponding CD. This seems a strange oversight: A major strength of Amazon is its user-contributed reviews; why make it difficult for MP3 buyers to find existing reviews for the same work in a different format?

In conclusion, I think the significance of the Amazon MP3 store is as follows:

  • It represents a tipping point in the move away from DRM. Amazon has put its stake in the ground: this is an MP3 store, not a store for digital music some of which may be DRM-free and some of which may not. Amazon has no incentive whatsoever to accommodate labels that insist on using DRM, and at a certain point I think such labels will not be able to resist the pressure to make their digital releases available through Amazon.
  • It intensifies the downward pressure on digital music prices, and in particular breaks the consensus that $9.99 is a fair price for the vast majority of digital albums. $8.99 is the new standard price for major label digital albums sold through major music retailers like Amazon, and I would not be surprised to see this drop to $7.99 or even $6.99 over the next couple of years.
  • It constitutes the first real competition for the iTunes Store (as opposed to eMusic, which was and is merely would-be competition). At the same time it recognizes the primacy of the iPod and iTunes (i.e., the software as opposed to the store), as opposed to being yet another futile attempt to overthrow Apple.

As for its possible effect on eMusic, my thoughts on that must wait for a future post.