Amazon may finally allow record labels to give iTunes a run for its money. But the e-commerce giant will also test the labels' tolerance for lower pricingAmazon.com's (AMZN) new music download service amounts to a grand experiment for record labels, many of which have agreed to sell their tunes for the first time without restrictions against copying and other digital rights management (DRM) protections. But Amazon's online store will also be a crucial test for just how flexible the beleaguered music companies are when it comes to pricing.
For the past several years, music executives have been desperately looking for a viable alternative to Apple's (AAPL) dominance in online music with its iTunes Music Store. Amazon, with its deep expertise in e-commerce, loyal following, and powerful brand, is exactly the kind of competitor that the music industry wanted. And unlike iTunes, where each and every song will continue to be priced the same, the new Amazon service is allowing the labels to have variable pricing. Most experts believe sales at the AmazonMP3 store, which opened Sept. 25, have been brisk and that Amazon is already the clear No. 2 in the market. Sony BMG's confirmation Jan. 7 that it will drop DRM for shoppers who buy music using gift cards for selected stores only increases the pressure for music companies to find new ways to sell downloads.
Record Labels Get Pricing Power
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