Amazon in Big Push to Clinch Music Deals
Amazon.com Inc. is aggressively courting the world's biggest music companies, as it seeks licensing deals that would help improve the online music service it launched Tuesday, according to people familiar with the matter.
Context & Ripple Effects
Amazon's cloud launch follows a longer digital-music buildout, from its early plan to challenge the iPod music market to the MP3 Store hiring that signaled a possible major service relaunch. Cloud Drive and Cloud Player add storage and playback to that retail foundation, including free storage tied to MP3 purchases.
The reported outreach to major music companies matters because Amazon had launched the service without industry approval while making licensing a route to improving it. The negotiations are reported, not confirmed, but they put rights-holder terms at the center of Amazon's next product choices.
First-order effects
- Major music companies become the immediate gatekeepers for Amazon's effort to improve Cloud Player and Cloud Drive with licensed capabilities.
- Amazon must reconcile a service launched without music-industry approval with the commercial terms sought by rights holders, if the reported talks produce agreements.
Second-order effects
- Licensing negotiations give major music companies leverage over how Amazon can differentiate its cloud music offering, rather than leaving the service defined only by storage and MP3 purchases.
- Amazon's MP3 retail business gains a stronger incentive to tie music purchases, storage allowances, and any licensed service improvements into one customer proposition.
Third-order effects
- If cloud music services require negotiated rights to add meaningful capabilities, digital-music competition shifts from selling downloads toward control of licensing relationships and the terms attached to access.
- The launch illustrates a broader move from music storefronts toward cloud-based services, with rights clearance becoming a product-design constraint rather than a back-office matter.
The trend: Amazon's music strategy is moving from MP3 retail toward cloud access, with licensing relationships determining how far the service can evolve.