Monday, September 15, 2008

What MySpace Music Means for Amazon

Jeff Bezos has done it again. The Amazon (AMZN, Fortune 500) CEO has created an MP3-download store that has quickly become the second largest digital music outlet after Apple' (AAPL, Fortune 500)s iTunes. Now he's struck an exclusive deal to build a similar store for the soon-to-launch MySpace Music. What does the MySpace (NWS, Fortune 500) deal mean for Amazon? It could mean a lot. The Amazon store is second place only a year after its launch. But it still trails Apple by a huge margin. Gene Munster, senior research analyst at Piper Jaffrey, estimates that Apple will sell 2.4 billion songs this year, giving it an 85% market share. By contrast, he says, Amazon will sell 130 million downloads - 5% of the market. This is where MySpace Music, which launches later this month, comes into play. The joint venture with Universal, SonyBMG and Warner Music (WMG) will allow the social network's 120 million members around the world to stream the entire catalogues of these music giants for free. It gives Amazon access to an online community teaming with young music fans who patronize the iTunes store. Granted, many will remain loyal to Apple. After all, iTunes isn't just a store. It's the software iPod owners use to manage their music collections. But Amazon is doing something that could persuade even the staunchest Apple fans to switch: it's beating iTunes' prices.

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