Amazon to take on iPod with its own music player

Unlike Apple, which sells songs for 99 cents each, Amazon will offer a service that charges a monthly or annual fee to customers, who will have the right to fill up their music players with as many songs as they like, the executives said. When they stop paying the fee, the music on the player will be disabled.

Amazon has not told the music industry what the fee would be, but similar subscription services range from $5 to $15 a month.

Apple, which sold 14 million iPods last year, has expanded its lead in digital music. Apple increased its market share last year in the United States to 67 percent of digital music players from under 49 percent in 2004, according to the sales and marketing research firm NPD Group.

Music industry executives are enthusiastic about Amazon's entry because it might be a counterweight to Apple, which many see as having too much power in digital music.

"We are excited to participate in Amazon's launch," said Greg Scholl, the chief executive of the Orchard, the largest digital distributor of independent music. The Orchard, he said, has not reached a final agreement to provide music to Amazon's service. "Given the quality of Amazon and its team, I'm sure it will be an innovative and successful music product," he said.

Scholl declined to discuss any details of his negotiations with Amazon.

In a conference call with investors last month, Thomas J. Szkutak, Amazon's chief financial officer, highlighted digital media as a major area of growth. "As we move forward with digital, we think Amazon is especially well-positioned to capture a bigger part of that business," Szkutak said.

Patty Smith, an Amazon spokeswoman, declined to elaborate on the company's plans.

Amazon's intention to tie a subscription service to its own music player was reported Thursday by The Wall Street Journal.

Music subscription services have been offered by Napster, AOL, RealNetworks and Yahoo for several years, and have attracted about two million customers, industry executives said.

One reason that the subscription services have not fared well is that the experience of using them with portable players is more difficult than using an iPod. The Microsoft software that all these services use has been awkward, and the players--made by several manufacturers like Samsung, iRiver and Creative Labs--have not been as appealing to consumers as those made by Apple.

Amazon hopes to remedy these problems by designing its own player in conjunction with a consumer electronics maker, and ensuring that the software works easily with it. The player would be discounted for customers who agreed to buy the music service for a specified period, the music executives said.

Amazon plans to load the player with songs of a customer's choosing before shipping it, the music executives said. And because Amazon maintains records of the CD purchases of its customers, it can also use that information to recommend music to be downloaded onto the players.

The company, in fact, is looking to leverage its role as a major vendor of CDs as it moves into digital music. It has discussed with music labels the possibility of offering discounts to subscribers of its music service on CD purchases.

It has also talked about giving CD purchasers digital versions of the songs, saving them the time and trouble of creating their own digital files to move onto the portable players. Record company executives say that the financial arrangements that underlie these potential discounts have not been finalized. They add that Amazon has said it hopes to introduce the service by summer.

Ross Rubin, the director of industry relations with NPD, said that Amazon's plan to create its own brand of player faced challenges. A similar effort to create a Napster-branded player made by Samsung faltered, he said.

"The branded music player approach hasn't worked because of Apple's considerable iPod marketing and brand power," he said. But he did say that Amazon's customer relationships may give it an edge.

"It's a unique advantage for them," he said.