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Wednesday February 28 1:49 PM ET
Amazon expands push into music downloads
By Scott Hillis
SEATTLE (Reuters) - Amazon.com Inc. Wednesday made its biggest push yet into music downloads, offering free songs from hundreds of artists such as Paul Simon and Pearl Jam as part of an effort to help spur slowing sales in the online retail giant's important CD business.
Seattle-based Amazon, which began a modest download section almost two years ago, will also let independent artists offer music for download and set up virtual tip jars so appreciative fans can donate money, with Amazon taking a 30 percent cut.
While the offering will not have the depth of file-swapping services like Napster (news - web sites), it is one of the broadest efforts yet by a major retailer to tap into the booming digital music phenomenon with the blessing of the recording industry.
``Basically the goal here is to dramatically expand what we've done in the past and do it in a way that's much more integrated with our existing store,'' Greg Hart, group manager of Amazon's music store, told Reuters in an interview.
The downloads will be offered in a special section, but Amazon is also weaving them into its CD store, so a user looking at, for example, CDs by The Eagles would also see they have songs for download, Hart said.
``There are lots of bridges back and forth between the CD buying area and the download area,'' Hart said.
Driving Cd Sales
The effort also comes as Amazon grapples with slowing growth in its core books, music and video business, which grew by just 11 percent last quarter, performance dubbed anemic by at least one analyst.
Chief Executive Jeff Bezos has also announced a raft of changes in the company as he tries to make good on his pledge to turn a pro forma operating profit by the end of the year.
In recent weeks Bezos has called for a halt to sales of unprofitable items and moved to capture new revenue like charging publishers to promote books in e-mail promotions.
Amazon won't make any money on the downloads, and Hart said it was too early to tell how much the virtual tipping system would contribute to revenues.
More importantly, Amazon's experience with downloads so far shows that such offerings can give a major boost to CD sales by letting consumers sample the music before they buy, Hart said.
``Definitely it will help us do a better job selling CDs. The free downloads have had a big impact in driving CD sales,'' Hart said. ``We definitely believe that each (part of the service) will provide value to our business in different fashions.''
``See What Works''
Songs will be available in the popular MP3 format or a format from Liquid Audio Inc. that lets record labels -- eager to protect copyrights -- set limits on usage, such as by making the song expire after a certain time, Hart said.
``In all the cases the labels recognize that free downloads do drive CD sales,'' Hart said. ``We've had great relationships with them and now they see it as a legitimate way to market CDs and drive sales.''
Amazon would add more artists, but Hart said it was unclear if the service could evolve into selling music downloads. He said the industry was looking at things like subscription services and pay-per-album or single offerings.
``I'm not sure how the industry will develop. There are lots of business models out there and I'm not sure which ones will be the long-term winners, but downloads will increasingly be an important piece of the music puzzle for fans,'' Hart said.
``I don't see this as the first step towards any particular model, but more trying a bunch of things at the same time to see what works,'' Hart said.
By courting downloads from independent artists, Amazon is taking a page from the book of one of the first online music services, MP3.com Inc., which started out as a showcase for unknown artists to reach millions of Web surfers.
``We add lots of editorial around the songs we get so it's not like searching for a needle in a haystack,'' Hart said.
Musicians can sign up to post their music, sell CDs, and collect voluntary payments through an extension of Amazon's Honor System service it launched this month. Amazon will take a 30 percent cut of all funds collected, Hart said. |
