Amazon vs. iTunes

Forget the Blu Ray vs. HD-DVD war, it’s time for Amazon and iTunes to get in the digital boxing ring and go head-to-head.

Amazon.com recently launched its beta digital music portal dubbed Amazon MP3, which will feature two million songs from 180,000 artists and 20,000 labels. But that’s not all: All of the MP3s from major labels EMI and Universal and thousands of independent labels are DRM-free.

For those unfamiliar with DRM (or digital rights management), it’s that pesky technology built in to the songs you buy online from such services as iTunes or Napster that make it so you can only listen to your music on certain MP3 players and on a certain number of computers. Not to mention the fact that DRM stores personal information about you within the song files.

So if DRM is so widely hated, why did it exist in the first place? Copyright protection, of course. Record labels wanted some type of system to ensure that their music wasn’t being spread across the Internet by the pirates of the digital sea.

Ultimately, however, the pirates won (and will always win). Anyone who wanted to convert a song with DRM restrictions into a standard MP3 needed no more than a Google search to do so. Copy protection in the digital age is always rendered useless the moment someone finds a way around it.

From a record label’s point of view, DRM has been limiting their online sales because of the device restrictions, such as iTunes songs only working with iPods. Labels EMI and Universal have both made deals with iTunes and Amazon to offer parts of their catalogs DRM-free. Naturally, both labels are still a bit wary of the idea and are not yet offering their entire catalogs.

Where the uproar and the “Oh, no you didn’t!” gossiping in the music industry comes from is the fact that Amazon is selling their high-quality DRM-free songs for 89 cents to 99 cents (although most appear to be 89 cents), whereas iTunes is selling their songs for $1.29.

But bad news is becoming common for Apple CEO Steve Jobs and his iTunes empire. While they are ranked No. 3 next to Amazon and Wal-Mart in the music retailer sales rankings, not everyone contracted with iTunes is happy.

NBC, for example, recently pulled its entire catalog of shows from iTunes because Apple wasn’t willing to sell their older shows for cheaper prices. But while everyone thought NBC was foolish for choosing to make no money versus staying with iTunes and at least making some money, NBC announced last week that they will soon offer some of their shows for free in a downloadable, DRM-free format that expire after a week.

Apple’s reluctance to work with labels and networks to create new, more flexible contracts that take power away from the Apple empire in terms of price setting has made them unpopular in the digital market. Will NBC’s departure start a domino effect to defect to the new guy in town (i.e. Amazon)?

While the dreams of millions have finally come true and the death of DRM is looming in the future, where will this take us? Isn’t this the same as taking the bar codes off of products at Best Buy and hoping people still pay while pirates sneak out the back door with the new Timbaland album? Will a new DRM arise in five years if this new strategy doesn’t increase sales but rather returns us to the days of Napster?

I’ve been saying for years that the idea of copy protection, or limiting the consumer rather than empowering the consumer through convenience, lower prices and the freedom to transfer songs or movies to any device, is ultimately what has been holding back the digital entertainment industry from becoming the sole way of buying content.

Rather than assuming that every customer is a pirate, why not beat the pirates with convenience and low prices? Oddly enough, most human beings are raised to think that nothing is free (except the Mustang Daily) and tend to want to pay for their music if they can do with it as they please for a low cost.

But while Amazon’s new service begins its battle with iTunes (and possibly soon Wal-Mart), music consumers can only sit back and watch. Will Apple drop iPod prices to hold on to iTunes buyers? What will replace DRM? Will the industry let everyone do as they wish, justifying greater sales as defeating piracy?

The battle has only just begun.