Rooting For Amazon

The Wall Street Journal broke the news yesterday that Amazon is getting into the digital music business with both a music service and a new music player in an attempt to compete directly with iTunes and iPod.

I am rooting for Amazon bigtime because I believe the market for digital content needs a strong competitive dynamic and Apple has a stranglehold on music and its using its dominance there to start doing the same with video content.

The rumors are that Microsoft will also launch a combined player/service offering this year.  I will be rooting for them too if that rumor is true.

I like a lot of what I’ve heard about Amazon’s plans.  First they are going with a combined service/device offering.  Apple has shown that is what it takes to make it in the digital music market.  The solutions that have required the consumer to buy a device from one party and the service from another have not taken off.  Simplicity rules and the turnkey offering from Apple has won the day.

Second, I applaud Amazon’s choice of a subscription service like Rhapsody and Yahoo! Unlimited.  I am a paid suscriber to both services and love both of them.  Subscription is the best way to consume music digitally.  For a flat fee per month, you can listen to whatever you want.

The problem has been that subscriptions services have never been well integrated with devices. Apple doesn’t offer a subscription option which is one of the many reasons I have come to dislike iTunes.  Rhapsody To Go works with a bunch of windows media devices but I have never been compelled to buy any of them.

I am rooting for Amazon to come out with a killer device that is simple to use, looks great, has a good form factor, and works seamlessly with their subscription service.  If it’s anywhere close to what I expect from them, I will buy the service and the device and leave Apple altogether.

Finally, a word of advice for Amazon.  The big objection to subscription services from consumers is that they are uncomfortable not owning the music.  They hate the idea that if they stop paying for the service, they lose the music.  That is basically true with music bought in iTunes and played on the iPod as well, because of the fairplay DRM, but that fact seems to escape most consumers.

My advice to Amazon is to offer a "buyout" provision to consumers as part of the subscription service.  Market it as "rent to own".  When and if you leave the service, you get to keep a certain number of songs.  And make that number go up every month that you remain a member.  And use the popularity metrics based on listens to create the default suggestion for the songs you would keep, but let the consumer modify it when they want.  And allow the consumer to select whatever format they want the music in on their way out the door.

Then consumers get the best of both worlds.  A flat fee for all the music they’d ever want to lsiten to for as long as they are enjoying the service.  And the ability to keeep the music they most want to own on their way out the door.

I hope Amazon does this.  Because they have the opportunity to level the playing field in digital music (and other forms of digital content) and popularize the subscription offering in one fell swoop.  I can’t wait until they come to market.

BTW – The picture of the device at the top of this post is probably fictitious. I scraped it from Slashgear.

#My Music#VC & Technology