Its move to offer unprotected music downloads has been anticipated since last Fall when Real Networks joined forces with MTV and Verizon. The Rhapsody MP3 Store offers music from all four major labels (Universal Music Group, Sony BMG, Warner Music Group, and EMI) at 99 cents per single and mostly $9.99 per single disc album.
While Rhapsody specializes in streaming music to paying subscribers ($13 per month gives you on-demand access to its entire music collection), this is not the first time Rhapsody has offered downloads. Most of its downloads have been protected by RAX-formatted DRM, although lately MP3 files have been mixed into its collection as well.
But with the launch of its MP3 store, Rhapsody fully endorses the idea that DRM is dead. And it goes toe-to-toe with the aforementioned DRM-free music stores, as well as iTunes Plus (whose files are actually in AAC format, not MP3), by providing over 5 million tracks that can play on virtually any music player without any restrictions. All songs will be provided with a 256 bit rate.
The Rhapsody MP3 Store sits to the side of the regular Rhapsody streaming music service on its own subdomain, but the two are also integrated with one another. Shoppers on the MP3 store site who are also paying subscribers can play full-length samples (non-subscribers can also play up to 25 full length samples per month). And subscribers have the option of buying and downloading the files they’ve enjoyed streaming but want to play when not at their computers (or connected to the internet).
The purchase experience is mostly browser-based; however, Rhapsody also provides a download manager that can automatically load songs into iTunes. Only Windows is supported at launch, with Mac support coming later.
Rhapsody is also working over the next couple of months to integrate its streaming and downloading functionality into Viacom’s network of music sites, including MTV, VH1, and CMT. It has teamed up with iLike as well to power music across all of that startup’s social networking apps and on its main website. Expect the same level of integration that we’ve already seen on MOG.
On related notes, Rhapsody is putting the finishing touches on its powering of Yahoo Music, which should go live soon so that Yahoo users aren’t simply redirected off-site. And it has just helped launch a new Verizon VCAST music service for getting its songs onto mobile handsets. With all of these partnerships, Rhapsody is working to become not only a destination but a platform for music distribution as well.
Streaming music may be the way of the future - especially when reliable and fast wireless technology becomes ubiquitous - but the launch of Rhapsody’s MP3 store goes to show that consumers still want to own their music - and control when and where they can use it.
Also see our round up of DRM-free music providers from last fall, which includes some of the more indie-focused services like Amie Street.
Internet-giant Amazon has acquired Fabric.com, an online fabric store that calls itself “The Place To Go When You Sew”. According to the press release, the deal will allow Fabric.com to expand its selection of sewing materials while giving Amazon a better catalog of hobby and craft materials. The cost of the deal was not disclosed.
Fabric.com was launched in 1999, and joins a growing list of Amazon acquisitions that includes dpreview, a camera review site acquired in 2007, and Audible, which was acquired earlier this year.
Barrons is all breathless about Amazon getting ready to step up its game in the payments arena. Eric Savits writes:
Cantor Fitzgerald analyst Derek Brown asserts in a research note this afternoon that Amazon “may soon launch a PayPal-esque Payments service for use by consumers and merchants across the Web, potentially siphoning growth and/or profit from eBay’s crown jewel.” Brown says that Amazon could launch such a service as soon as late summer or early fall of this year.
But wait. Amazon already competes with eBay’s PayPal. It’s called Amazon Payments and it lets you:
—send money to anyone’s email address or mobile phone.
—make online purchases at other participating Websites
—buy Amazon products using your mobile phone.
It launched the current version of Amazon Payments last year. Also, last year Amazon launched its Flexible Payment Service as a Web service in limited beta so that developers could integrate Amazon’s checkout into their own sites (customers use their Amazon login, and the Website gets paid by Amazon, after a fee).
The article notes that both of these services exist, but does not explain how Amazon could go beyond their current offerings. So it is not exactly clear what further steps Amazon will take to beef up its current Amazon Payments service into a full-fledged competitor to PayPal. In terms of functionality, it is already pretty close. It even looks the same as PayPal. (Click on screen shot above).
Even if it does push the service harder, Amazon won’t find it easy to displace PayPal, which is deeply entrenched as one of the preferred payment mechanisms on the Web. But competition does keep everyone honest. So good luck to Amazon.
Last week at the D6 conference, Om Malik caught Jeff Bezos on video after his on-stage appearance (in which he talked about a new pay-per-download movie service). In the five-minute hallway interview (embedded below), Bezos explains why a Web retailer is offering cloud computing services. The answer is because Amazon, as a Web-scale application, had to build these services for itself anyway. (Many investors and Wall Street analysts apparently still don’t get the connection).
Also, when asked if Amazon is considering starting its own venture fund to encourage Web Services startups like the iFund or the fbFund, Bezos laughs, and points out that plenty of venture-backed startups are already using Amazon’s Web services.
Jeff Bezos leaked a little nugget of news during an interview on stage at the D conference this morning: Amazon is getting ready to release a pay-per-view streaming service for movies. Buried in Eric Savitz’s notes from the interview:
Next topic: music and video downloads. Bezos says he is “very serious” about the business; he says it is in some ways harder because there are so many participants. It has a glamor element, that attracts people; he says they are working on for-pay streaming service that will be unveiled in a few weeks; will start instantly, a la carte for pay. (Hey, actual news!)
Bezos didn’t get into many more details, and Walt Mossberg, who was doing the interview, didn’t ask him (Planning a review, Walt?). But it would make sense to add streaming as an option to Amazon’s existing pay-per-download Unbox service. As we noted last March, Unbox has not been doing so well and Amazon sent out a survey to users to try to figure out what was missing. In our informal poll, free video streaming with ads scored as the most sought-after feature. Paid video streaming was No. 7, out of ten options. Here’s a snapshot of that poll as of this morning (you can still vote on it if you go to that previous post):
Is instant-on video streaming going to make that much of a difference, or is there something else keeping Unbox unloved?
One thing Citi analyst Kevin Mahaney didn’t know about earlier this week in his very optimistic sales estimates for the Kindle: Jennifer Aniston is apparently a fan. At least, that’s what it looks like in the picture above published by US Weekly (that is the first time and also the last time that publication will be mentioned here on TechCrunch, promise).
Amazon has taken a special interest in one of its web service customers: Animoto, the machine-driven music video creator that launched last August and now has over 160,000 users. The online retail giant has decided to fund the startup with an undisclosed amount of money.
Animoto takes photo and music files from users and essentially turns them into souped up slideshows with background music that synchronizes with effects and transitions. The service uses Amazon’s SQS, S3 and EC2 to store the requisite files and process the videos.
Cloud computing has been so vital to Animoto’s operations that Jeff Bezos even used the company as example of how well EC2 helps web apps scale when their traffic hockey sticks (in Animoto’s case, when its Facebook app took off last month).
To celebrate Animoto’s new influx of money, I’ve compiled the following video with background music by Pink Floyd. My only quibbles when putting it together include the inability to use PNG files or search for photos on Flickr by tag.
The Kindle, Amazon’s ugly but useful ebook reader that launched in November 2007, may be a burgeoning hit, says Citigroup Analyst Mark Mahaney. Citi expects Amazon to generate between $400 million and $750 million in revenue from the Kindle by 2010, or 1% - 3% of Amazon’s total revenue.
The key points of differentiation with the Kindle and competing devices is the fact that books and other content is delivered to the Kindle wirelessly and that the Kindle has the largest book selection by a significant margin (more than 120,000 books, magazines, newspapers, and blogs, including 98 of 112 current New York Times Best Sellers). Mahaney also points out that the Kindle has more memory than competitors, and supports newspapers, magazine and blog subscriptions. See Mahaney’s comparison chart below for additional details:
Mahaney points to slim public data about Kindle sales to date in making his predictions:
How Is Kindle Doing So Far In The Marketplace?
Our ability to answer this question is very limited. Amazon is the sole retailer of the Kindle and it has disclosed no information about its sales other than to say
that it sold out in the first 5 1⁄2 hours. But we have pieced together four different clues to gain a sense of Kindle’s traction.
First, we note that Kindle has consistently been ranked among Amazon’s Bestsellers in its Electronics category. Ahead of the Apple iPod Nano, the Garmin GPS Navigator, and the Canon Powershot Digital Camera.
Second, we note that the Kindle has received a very large number of customer reviews. Per the exhibit below, we note that Kindle has received more customer
reviews than any of the other Top 10 Bestselling items in Amazon’s Electronics category – 2,537 reviews as of May 12th – vs. 663 for the Apple iPod Nano 4
GB Silver (3G), the #2 Bestseller. This is in part an unfair comparison. Kindle is a new product sold only on Amazon.com, while there are numerous versions of the iPod, and they are sold by numerous retailers. But still, the volume of reviews does indicate material traction for the Kindle.
Third, we see that the quality/tone of the customer reviews the Kindle is receiving is relatively positive. Below we compare the Star Rating Diffusion – 5 Stars vs. 4 Stars vs. 3 Stars etc… – for each of the Top 10 Bestselling Electronics Items on Amazon. What we see is that the Kindle actually receives fewer high scores than the other Bestsellers – 69% of its reviews are 4 or 5 Stars vs. an average of 80% for the other items. And it receives more low scores than the other Bestsellers – 22% of its reviews are 1 or 2 Stars vs. an average of 13% for the other Items. But for a Version 1 of a product “competing” against a several times iterated leading consumer electronics item like the iPod, a 69% Star 4 or 5 rating is relatively positive.
And fourth, we note that the most reviewed Customer Review of Kindle (“Why and how the Kindle changes everything” by Steve “eBook Lover” Gibson) has been reviewed by at least 27,000 people. Specifically, as of May 13th, 26,931 have read Steve Gibson’s review and actually commented on it by pressing the Yes or No button when asked if the review was helpful. And logically, there would be more people who read the review and didn’t bother to vote, although the voting step is hyper-easy. We believe that this helps provide something of a proxy for how many Kindles have likely been sold. We’d peg the number as somewhere between 10,000 and 30,000 Kindles sold to date.
Citi took this indirect sales data and built a model based on the adoption curve of the iPod “Here’s what’s known. Launched in CQ4:01, the iPod went from 129,000 unit sales in its first quarter to becoming a mass market phenomenon, with a current installed base of approximately 100MM.”
They apply similar adoption rates to the Kindle that the iPod saw (starting at a much lower base: 129,000 iPods v. 10,000 - 30,000 Kindles in first three months on the market) and then discount the entire model by 50% - 75% to hedge risk in coming up with the three year revenue model. “So perhaps, if Amazon executes right with its Kindle product and marketing strategy, the iPod analogy for the Kindle won’t be too far stretched,” Mahaney says.
About half the projected revenue is from Kindle sales, half from book sales after purchase.
What’s our take? I was down on the Kindle when it first launched but quickly fell in tepid like with it once it was in my hands for a few weeks. But then John Biggs at CrunchGear borrowed it from me in January, apparently permanently. I’ve learned to live without it. The biggest issue I had with it, once I got the hang of it, was accidental page turns. I’m still buying a lot of normal books, but when I get my Kindle back I’ll happily switch back to the ebook world.
A fight is brewing between Amazon and the State of New York over who is responsible for collecting state sales taxes on online purchases. Up until now, online retailers have only had to collect state sales taxes in states where they have physical locations—the same way that catalog retailers are treated. Otherwise, it is up to consumers to declare goods bought over the Internet as out-of-state purchases. (Right. I’ll go find those receipts).
Since most people don’t bother to declare online purchases on their tax forms, the State of New York recently passed some legislation (tucked into last month’s budget bill) known as the “Amazon Tax”. This new law conveniently redefines any Amazon affiliate as part of the retailer, and since there are plenty of Amazon affiliates in New York State, puts the burden of collecting the state sales tax onto Amazon. Clearly, this ridiculously stretches the boundaries of what constitutes Amazon and what does not. So Amazon is suing New York State to overturn he law.
Amazon argues that the law is “overly broad and vague” in its attempt to place the company physically inside the state, and also complains that the law unfairly targets Amazon as opposed to online retailers in general. (Although it does apply to all online sales, not just Amazon’s).
The law, as written, is just a bad law. And it would set a dangerous precedent. Not because New York State shouldn’t try to collect the $50 million in estimated uncollected sales taxes owed to it. But because the law is tortuous in the way it attempts to do that.
A marketing affiliate is not part of Amazon. If I put some Amazon book recommendations on the side of TechCrunch , set up an affiliate account, and readers click through and buy those books, that does not make TechCrunch part of Amazon. It is a marketing arrangement. Just like someone who sets up an AdSense account does not work for Google.
This still leaves the question of who should be collecting state sales taxes on online purchases. On that matter, I’m on New York’s side that it should be Amazon. It knows what state its customers reside in since it has their credit card information and is shipping goods to them. How hard would it be for Amazon to add a sales tax calculator to its checkout cart that calculates a different sales tax depending on the state of the purchaser? The answer is that it wouldn’t be hard at all, but that Amazon doesn’t want to do it because every additional surcharge at checkout results in more abandoned carts due to last-minute sticker shock.
Unfortunately, New York State has no jurisdiction over Amazon, which is headquartered in Washington. So the way to fix this would be a federal law that applies to all retailers. But Congress only cares about federal taxes and is not going to pass a law that will be unpopular with consumers to put more money into state coffers (setting aside the question of whether it can pass a law directing how state taxes should be collected in the first place). Without a federal law, though, more states will pass more bad laws on their own. So, what’s the answer?
After years of negotiating with the movie studios, Steve Jobs finally got them to agree to put their movies on iTunes the same day as they release them on DVD. Now, in addition to Disney—which has been selling movies on iTunes since September, 2006—Apple is distributing 1,500 films from 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studio. New movies can now be purchased for $15, or rented for $4 (older movies are $10 for purchase or $3 for rental).
Apple watchers have been expecting this for a long time. It announced a deal to distribute rentals in January, and even that leaked out beforehand. But both Amazon and Netflix already have their own movie download and/or streaming services. And both offer more titles—Netflix has more than 6,000 and Amazon has nearly 12,000. (Although, Amazon may be rethinking its Unbox service).
It was only a matter of time before the studios relented and struck a deal with Apple. They could only stand on the sidelines and watch Disney ring in the coin for so long. The idea of distribution windows is so Twentieth Century anyway. How long before movies appear online the same day they hit the movie theaters? Come on Steve, we’re counting on you.
