Amazon Not Breaking Apple's Rhythm

Amazon.com (AAPL) may be jumping into the online music mosh pit, but don't expect Apple Computer (AAPL) to give up the stage any time soon.

Published reports indicate that Amazon is close to launching its own digital music service that would compete with Apple's industry-leading iTunes store. In conjunction with the move, Amazon also will apparently offer its own line of Amazon-branded digital music players that would work hand-in-hand with the service, according to the reports.

As the leading e-tailer with lots of experience in selling music online, Amazon has significant advantages that could help lift its service above other digital music also-rans such as RealNetworks' (RNWK) Rhapsody service.

Along with the company's millions of active customers, its experience and content could help jump-start its online music store, analysts said.

"Those are all powerful assets that they could bring to the table," says Mike McGuire, who covers the digital-music business as an analyst with Gartner, an industry research firm.

But it will need more than just those to take down Apple.

"I don't think [Amazon's prospective store] is a threat at all," says Tim Bajarin, principal analyst with Creative Strategies, an industry research and consulting firm. "There are a lot of things that Amazon would have to get right for this to work."

That's because for the many advantages Amazon may have, its digital music store would start off with some significant obstacles. iTunes has already established itself as the leading online music provider, and Apple brands such as iTunes and the iPod music player have become strongly identified with what is hip and cool in the digital music market.

The iTunes store had 83% of the market for U.S. digital music sales in December, according to Nielsen SoundScan data released by Apple CEO Steve Jobs last month. Apple's various iPod lines own north of 70% of the digital music player market in the U.S.