Another Take on Amazon Music: High-Stakes Chess?

Posted by: Rob Hof on February 20, 2006

When record labels leaked Amazon’s apparent plans for a digital music store last week, I wondered if the store would be mostly a way for Amazon to get more people to come more often to Amazon.com, where they might buy other stuff. After all, digital music stores seem marginally profitable at best unless you’re Apple and can use the music store to sell quite profitable iPods.

But one source in digital music suggests a way that Amazon might actually provide something different than Apple while making the digital music business more profitable: What if Amazon believes that the fair use doctrine allows it to load music that people already own—CDs they bought from Amazon, that is—onto a music player for free? People can do that themselves now, right? Loading a very cheap or free music player—even if it’s not an iPod—with essentially free music could be a compelling, no-hassle proposition for a whole lot of music lovers.

I suspect the labels would contend it wouldn’t be legal for Amazon to do it, but it’s not crystal-clear to me that such a practice would indeed be illegal. But even if Amazon didn’t actually try to assert this right without the labels’ blessing, could it use that potential as a club to get price concessions on digital songs from the labels? Lower prices might help Amazon’s digital music business actually make money.

If Amazon has waved this club in front of the labels—a big if, of course, since Amazon isn’t even talking about its music plans, let alone its negotiations—it may explain why the labels leaked Amazon’s plans so early. It doesn’t seem accidental that the labels put Amazon in a spot by mentioning a time frame for the music store—this summer—while noting that negotiations aren’t done yet. Checkmate, Amazon?

Yeah, it’s all sheer speculation, especially since it’s hard to imagine Amazon would challenge the labels that publicly. So take it with a grain of salt. But stay tuned.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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