Amazon Leaps Into Napster's Free-Music Turf

Hart said the downloads section contains thousands of free music files, comprising a mix of major-label artists and unsigned garage bands. Clearly, though, the major artists are the draw. At launch, the section offered exclusive free downloads from the Beastie Boys, Pearl Jam, Coldplay, and the Eagles, among others. Hundreds of other major label artists also are represented with free tracks provided to Amazon on a non-exclusive basis. 

Hart said each track assigned to the site by major labels is negotiated individually. That has resulted in a kind of smorgasbord approach, with some tracks being made available for permanent free download as MP3 files, and others being offered as Liquid Audio tracks that become unplayable after a set expiration date. 

Along with the launch of the downloads section, Hart said that Amazon has revamped its Advantage program, a CD promotion and distribution system for unsigned musicians. Similar to the program available on the MP3.com site, Advantage supplies up-and-coming groups a place to hawk their CDs free of charge on Amazon, while allowing users to download and sample some of the tracks. 

As of today, Advantage allows artists to directly upload sample tracks to Amazon for free download, and puts in place a virtual tip jar where fans can contribute cash directly to the acts through credit-card donations, Hart said. 

Artists with presence on Advantage are not asked to sign exclusive contracts with Amazon, and may duplicate their presence on competitors' services like MP3.com, Hart said. "We think it's important for artists work to be as widely available as possible," he said. 

The overall goal of the new section, Hart said, is to expand what Amazon has been doing with limited download programs in the past, but in a way that's more integrated with the existing online store. CD sales will be pushed hard through promotions that accompany the free tracks, he said. 

Mike Goodman, a senior analyst in media and entertainment strategies at the Yankee Group, agrees with Hart that the new Amazon section is a departure. And what separates it from competitors like MP3.com, he said, are the stars dominating the site. 

"Clearly the key here is mainstream artists," Goodman said. "The more mainstream you can get, the more use it's going to get. If we're talking some garage band that nobody's heard of, you're not going to drive a lot of downloads from that. You might get a couple of people that are curious, but that's a very different level of activity. That's exactly what MP3.com has done." 

Goodman said that the move could be a good one, especially if it manages to drive up CD sales. Amazon is emerging from a fiscal quarter during which sales growth of its core book, movie and CD markets flattened out. Hit hard by the dot-com downturn, the company's stock value has plummeted nearly 90 percent from peak levels 14 months ago. 

But the free downloads section, capturing as it does some element of the free-download zeitgeist, has some potential to work magic for the company, Goodman said. "It's a brand-new move, so the jury is out on the success they're going to have," he said. "I think it definitely has the potential to improve their CD sales." 

Nonetheless, he said, it is no Napster. Napster users swap billions of songs, and at best the new Amazon section contains a couple thousand tunes. 

"Thousands is good. It's a starting point," Goodman said. "But it's not an end point. They need to create more and more content here. It's kind of self-perpetuating. The short term goals is to find a way to sell CDs." 

However, the analyst cautioned that such a situation could create a bind, and Amazon must tread the space lightly. If it is offering major-label music with the permission of the copyright holders, he said, Amazon is spending big money. Care must be taken that those costs do not outweigh revenues from increased CD sales, especially since online advertising at this point is an anemic source of cash and not a promising supplement to sales. 

"We're looking at U2, Smashing Pumpkins, David Bowie, George Michael, Nirvana," he said. "We know from the fight that's going on with Napster that record labels don't give anything away for free." 

Said Goodman, "The hope is that you'll make up the money on increased CD sales, but you still have to pay whatever you were paying for CDs to begin with. This is essentially a marketing cost for selling those CDs. So you're eating into that market even more."  Hart told Newsbytes that the site will try a variety of models for its new download section before it settles on any one of them. 

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