Amazon Borrows Play From Napster

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Amazon.com yesterday ripped a page out of online music swap shop Napster's playbook.


The e-tailer began offering free downloads of songs from recording artists such as Nirvana and David Bowie and said the move would boost sagging CD sales.


Amazon, Seattle, also is letting independent artists offer free, downloadable music and has set up an electronic tip jar so fans can donate money.


Amazon will take 30 percent of tip jar proceeds.


Unlike Napster, which is being sued by the Recording Industry Association of America for allowing its users to share copyright-protected music, this effort comes from a major retailer and is delivered with support from the recording industry.


"We've created the first free music downloads community that benefits everyone involved: fans, artists and labels," said Andy Jassy, general manager of Amazon.com's Music Store. "Fans can check out great free music, artists get exposure to more than 30 million customers -- driving CD sales and tips -- and labels benefit from a proven way to market their artists' releases," he said.


In recent weeks, Amazon CEO Jeff Bezos has called for a halt to sales of unprofitable items and has moved to draw revenue by charging publishers to promote books in e-mail promotions.


Ryan Jones, an analyst at Yankee Group, Boston, views the move as Amazon's attempt to catch up to Napster.


"Napster really jumped ahead of the curve and did it without the permission of content providers," Jones said. "Now, those with the permission of content providers are trying to catch up."


For example, Sony.com now offers song downloads from its site, but it charges $2 to $3 per download and the use of the music file is limited.


The Amazon initiative is expected to increase its customer base, boost CD sales and get its customers used to making micropayments via virtual tip jars.


Amazon wants to "capture the frenzy of those who have been downloading music files and get them into the Amazon family," said Paul Ritter, director of online retail strategies at Yankee Group.


Implementing micropayments via virtual tip jars is part of a larger goal to improve overall profit margin, Ritter said.


"This opens the strategy for them to sell $1 or $5 items," Ritter said. "[The music program] is to test their micropayment abilities. Once Amazon works out the technology, they could charge micropayments for instant editorial and news content downloads, for example. This could build into a whole new cottage industry for Amazon."


The strategy is in line with Amazon's recent moves to produce higher margins, including raising its auction fees. In mid-February, Amazon launched its Software Downloads Store, where customers can pay a fee to download software programs directly to their computers.


Amazon expects the music download system -- which also allows independent musicians to upload songs for free -- to drive CD sales.


"Giving customers the ability to try before they buy is a proven method to drive sales," Amazon said in a statement. Artists offering free downloads on Amazon for the past 22 months have experienced an average 40 percent increase in CD sales.


After listening to a downloaded file, music fans can buy the artist's CD with a single click.


Amazon's free service will allow consumers to use music files in more ways than they can use downloaded files from more restrictive record label sites, according to Jones. But that does not guarantee the service's success, he said.


"They're not going to be beating Napster anytime soon," Jones said. "Their library is a lot more limited." Also, other free music services are improving, Jones added.


The Free Music Downloads area will include editor's recommendations, customer reviews and most popular downloads lists. In conjunction with the new community, Amazon's music store is hosting an online auction featuring autographed prints, photo books and CDs by well-known acts and musicians.


Christine Blank contributed to this report


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