Amazon Takes Aim at Apple

Online retailer Amazon.com(AMZN Quote) stepped up its attempt to challenge Apple's(AAPL Quote) dominance in the music downloading market.

The company said on Thursday that its music downloading service, called Amazon MP3, will release tracks from Warner Music Group artists available without digital rights management software that prevents copying and sharing. This expands Amazon MP3's library to 2.9 million DRM-free songs at prices of 89 cents or 99 cents per download.

Amazon's expanded catalog elevates the company's stature as a player in the market for digital music. Analysts see the move as an attempt to remain a relevant music retailer as sales of compact discs grind to a halt that media trackers from the Yankee Group say could come as soon as 2012. But Amazon MP3, which debuted in September 2007, has arrived late to the game and will be hard pressed to dislodge Apple.

Premillennium movers like Napster scared recording labels into rallying behind the DRM-protected downloading service that Apple devised with its 2001 launch of iTunes and the iPod, and which catapulted the company to a commanding and unrivaled market share.

Apple now holds roughly 80% of the market for both online music downloads and sales of digital music players, and has sold over 100 million iPods and several billion songs from iTunes.

"I think Amazon is taking a step toward becoming more competitive, but it's only a baby step," says Michael Goodman, a Yankee Group analyst. "In order for somebody like Amazon to appeal to iPod users, they have to be significantly better than iTunes."

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