Amazon's next gig: online music

Amazon.com plans to open an online music store offering only songs that are free of copy-protection technology and can be played on anything from PCs to an iPod or Zune.

The Internet retailer decided to steer clear of digital-rights-management (DRM) technology because consumers want to be able to listen to their music on any device they choose, executives said Wednesday.

The market-leading Apple iPod, for instance, can't play copy-protected music purchased from Napster or RealNetworks' Rhapsody store. Microsoft's Zune can't play tunes bought on iTunes. All players support music in the MP3 format.

Amazon's strategy "is helping to pave the way for a much better, much more customer-centric experience in digital music," said Bill Carr, Amazon's vice president of digital media.

Shares of the Seattle company rose $2.64, or 4.4 percent, to $63.22 Wednesday, toward the high end of the company's stock price over the past year.

Amazon's music store wasn't unexpected, and the company is tearing a page out of Apple's songbook by offering music that's not locked down by digital-rights management technology.

Like Apple's iTunes Store, Amazon will offer DRM-free songs from Britain's EMI Music Group, the third-largest record company and only major label that has offered its music without DRM.

Amazon also said it will offer millions of tunes from 12,000 unnamed labels. Apple, however, will continue to sell copy-protected tunes.

Amazon said it would announce more labels when the service goes live later this year, but it did not identify a specific date. Songs will be sold by the track or album, without a subscription option. Amazon didn't provide prices.

Carr said Amazon has always focused on giving customers good bargains and hinted that music will be offered at various prices.

"We have a track record of being very competitive on price and offering very low prices to customers," Carr said. "We also have a track record of offering a wide range of price points on our products, too. There's not one or two or three price points on our CD store today — there are many, many different price points."

Last month, EMI agreed to let Apple sell tracks without the copy-protection technology through iTunes. Apple has yet to begin selling the EMI tracks but has said it would make them available sometime this month.

Apple plans to charge $1.29 for tracks without DRM — 30 cents more than copy-protected songs. It also said the pricier tunes would feature enhanced sound quality.

Earlier this year, Apple CEO Steve Jobs called on the world's four major record companies, including EMI, to start selling songs online without copy-protection software.

Asked how Amazon plans to compete with Apple's market-leading iTunes store, Carr said the Web merchant has a huge customer base, with 66 million active accounts. He also touted the success of its CD store, which in the United States alone offers some 1 million titles.

Phil Leigh, an analyst with Inside Digital Media, predicts Amazon will quickly become No. 2 to iTunes, which has a 70 percent market share for digital downloads.

He also says Amazon is being vague in its timing to give it time to get more labels on board. "They have a crippled catalog right now and need more tracks," he said.

Barney Wragg, head of EMI's global digital division, said the company believes Amazon's entry into the digital-music business will make an intensely competitive market even more competitive.

"Amazon has proven it's a really competitive, successful retailer in the CD business," Wragg said, "and we're very excited about having people who have a proven track record come into the download business."

Amazon is the No. 5 seller of recorded music after Wal-Mart, Best Buy, Target and Apple.

Amazon could push the digital-music market forward by pressuring more major music labels to sell DRM-free music, IDC analyst Susan Kevorkian said.

"We think Amazon's position in the market could be influential enough to move some if not all of the remaining majors toward offering MP3-encoded, DRM-free downloads," she said.

"The majors need to be looking at new ways and better ways to sell music."

At a gathering of corporate chief executives at Microsoft's headquarters Wednesday, Microsoft CEO Steve Ballmer asked Amazon CEO Jeff Bezos if the online retailer would sell music in Microsoft's Windows Media Audio format.

Bezos said it would not, because the format doesn't play on iPods.

Information from Associated Press reporters Alex Veiga in Los Angeles and Jessica Mintz in Redmond, as well as information from USA Today, is included in this report.