Amazon Invests In DRM-Free Music Site

Raising its bet on unprotected digital music, Amazon.com has invested in AmieStreet.com, an innovative digital music site. The terms of the deal, announced by AmieStreet.com on Monday, were not disclosed.

AmieStreet combines social networking with music sales. It features a variable pricing model where songs start free and rise in price as more people download and buy the music, up to a maximum of 98 cents. None of AmieStreet's songs come with copy-inhibiting technology known as digital rights management or digital restriction management (DRM).

Apple's online iTunes Store sells songs with DRM tags for 99 cents and some without it for $1.29.

AmieStreet members who recommend songs earn credits toward the purchase of additional music, based on the popularity of the recommended material.

"AmieStreet.com grew from the idea that we needed to make buying music social and fun," said AmieStreet's co-founder and CEO Elliott Breece, in a statement. "The Amie Street community took over from there, driving a shift toward a music marketplace where consumers decide what is popular and what music is worth."

In May, Amazon said that it planned to open a digital music store later this year featuring millions of songs in the unprotected MP3 file format from more than 12,000 record labels. Unprotected MP3 files will play on any device that supports the format, including Windows and Mac PCs, Apple iPod, Microsoft Zune, and Creative's Zen MP3 player.

"Our MP3-only strategy means all the music that customers buy on Amazon is always DRM-free and plays on any device," said Jeff Bezos, Amazon.com founder and CEO, in May, echoing sentiments voiced earlier in the year by Apple CEO Steve Jobs that DRM should go.

EMI Music, one of the record labels that will be selling unprotected MP3 files on Amazon.com, made waves in April when it became the first major label to disavow DRM by striking a deal with Apple to sell its music through iTunes without any kind of copy protection. In an earnings statement released on Monday, EMI said, "Early revenue indications for this initiative are encouraging." The company reported that digital revenue increased by 13.2% between April 1 and Aug. 6. In April, Apple said that more than half of its iTunes music inventory would be DRM-free by the end of the year.

But not everyone is so keen to give consumers control over their music. Nokia yesterday announced an agreement to use Microsoft's PlayReady DRM technology on its S60 and Series 40 mobile phone next year.

In March, the NPD Group reported that in 2006, there were almost 13 million households using a paid digital music download services, three times more than the company reported in 2004. In 2006, consumers purchased more than 500 million music files, up 56% from the year before. They also downloaded 5 billion files through P2P networks, a 47% increase from 2005.