Just six months after the launch of its mp3 music service, Amazon has emerged as the number two digital music retailer. While Apple still has a huge lead, that lead seems to be dwindling quickly.
The major labels may see this as some form of progress in their efforts to break Apple’s perceived monopoly in the digital music market, but the truth is they are very likely creating a new problem for their industry.
Despite the fact that the majors have begun licensing the rights to distribute DRM-free tracks to multiple retailers, Amazon seems to be the only company that has a clue about building a successful online marketplace. As a result, Amazon could quickly become something of a de facto monopoly for legal mp3 downloads. That’s astounding when you consider that the marketplace for unprotected music downloads should be wide open and highly competitive.
The formula for building a successful digital music marketplace seems relatively easy. Consumers want access to a wide selection of reasonably priced DRM-free music, presented in a well organized marketplace that supports all computing platforms. Retailers who expect to compete should offer decent search and discovery capabilities, and maybe even a few social features. This is 2008, after all.