updated 04:25 pm EDT, Wed May 16, 2007
Analyst on Amazon music
Amazon today revealed the forthcoming launch of a direct-download music store offering tracks without DRM (Digital Rights Management) in the open MP3 format. "The announcement is a carbon copy of Apple's deal with EMI," said Piper Jaffray senior analyst Gene Munster. "Amazon will offer the same DRM-free tracks as iTUnes, and therefore will have no competitive advantage over Apple." The analyst says Amazon is playing catchup with iTunes, and points out that Amazon's music store will not carry any DRM-free tracks that Apple's own iTunes store doesn't already offer. "We believe the Amazon music store will not materially impact Apple's business," said Munster. "In fact, although Apple's dominance frustrates music studios, the reality is that Apple's market share (70 percent in the U.S.) gives Steve Jobs and iTunes the upper hand." Piper Jaffray maintains its "Outperform" rating on Apple shares with a $140 price target.
That upper hand, says Munster, results in the Cupertino-based company's ability to be first to market with new features and more DRM-free music. The analyst also touches on the potential for iPod owners to purchase tracks from Amazon's upcoming store, rather than iTunes, and upload those tracks onto their iPods.
"Users will be able to put the DRM-free tracks from Amazon into iTunes and then onto their iPods," the analyst said, noting that this "adds a confusing and unnecessary step."
"We believe that iTunes offers the simplest way for music shoppers to browse the largest music catalog available. We also believe that Apple will continue to enhance the iTunes Store in order to maintain its lead in the online music space."