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Amazon Not Breaking Apple's Rhythm

The iPod maker has no reason to sweat the retailer's march into online music.

Amazon.com

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may be jumping into the online music mosh pit, but don't expect

Apple Computer

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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'

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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."

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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.

Recent indications are that Apple's dominance is only increasing, with the company on pace to sell a billion songs through iTunes this year and its sale of 14 million iPods in the fourth quarter.

"I have doubts that Amazon will be able to displace the iPod's position of dominance in the market," says Tim Deal, an analyst with Technology Business Research.

With its iPods and iTunes, Apple offers an all-in-one, seamless experience for customers. That's something that competitors have yet to match. The competing services tend to work with players using

Microsoft's

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Windows Media technology. While there are a number of subscription services available and quite a few different Windows Media digital music layers, there seems to be some confusion from consumers about what works with what, analysts say.

But more than that, the subscription services have had a hard time overcoming consumer behavior. Consumers have traditionally acquired music by purchasing it via CDs or LPs. Those don't go away and they can do with them as they wish or play them where they wish.

As sketched out in published reports, Amazon would offer music to subscribers, meaning that users would be able to tap into Amazon's entire library of digital music for a monthly fee. If they stopped paying, however, they no longer would be able to listen to the music.

Songs bought on Apple's iTunes work very similarly, analysts note. But the subscription model is quite different. Consumers are simply not used to the idea that they could lose their music if they stop paying for it every month, they say. And there's some question about whether the mainstream consumer will ever accept it.

Despite all the subscription-based services available now, this is still a much less familiar model than pay-for-download," says Susan Kevorkian, an analyst with industry research firm IDC.

Even if consumers do rally to subscription services, Amazon could have a hard time getting attention for its own. At least one other high-profile digital music store is expected to launch this year: Urge.com from

Viacom's

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MTV. The service was already touted by Microsoft at the Consumer Electronics Show and is sure to be heavily promoted across MTV's affiliated networks, analysts say.

"It's not just Apple that everyone is pointed against," says McGuire.

And then there's the coolness factor. With ads starring the likes of Eminem and Wynton Marsalis and its sleek players, Apple seems to have defined what's cool in digital music. Amazon could offer a digital music player with its own name on the outside, but would it crack the cool code? Analysts have their doubts.

Can you imagine a teenybopper bopping along to his Amazon pod or whatever?" says Bajarin. "That's a stretch for me."