MOLI VIEW™

I'll leave the tech aspects to others (Oh, Rob!), but in terms of business, it's been an open secret that selling music on Apple's iTunes store has not really been a moneymaking operation. Its main purpose is to sell iPods! On that basis, it's been quite successful, wouldn't you say?

There are reports, of course, that iTunes has been a reasonably profitable venture for Apple, with about a 10 percent margin. How does that break down? Out of the 99-cents-per-song price, record companies, music publishers, artists, and songwriters split about 70 percent and the rest goes to Apple's "operating and network costs."

Yesterday, Amazon cut that margin and began selling 256-kbps MP3 files without any copy protection or restriction for as low as 89 cents on its AmazonMP3.com store. Interestingly, the website is selling full albums by artists whose work is NOT on sold on iTunes, like Radiohead, for example.

But as music business prophet Bob Lefsetz points out, the alternative to the iTunes store is not another retail music site. It's downloading music for free. That's the real competition.

That said, I would certainly consider buying stuff on Amazon's site. Why not? In the past, I've purchased songs by Miles Davis, U2, the Four Tops, and others on iTunes. Most music sales are emotional and not rational, so if the spirit moves me, sure. I already buy a variety of things on Amazon — love that Irish oatmeal!

But will AmazonMP3.com kill iTunes? I don't think so. The issue is one of convenience. The market (or audience) is still out there for music. It just has to be monetized. Instead of dividing the pie, Amazon may just have baked another one.
Richard Pachter is the MOLI View's contributing editor for Business.

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