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Why Amazon Is the New Digital Media Alpha Dog

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Alpha dogMost assumed Apple or Google would be the digital media giants to first implement cloud-based music streaming, so it surprised quite a few folks when Amazon actually made the first move.

Some have pointed out that smaller companies have done similar cloud-based media lockers or music streaming services and perhaps we shouldn’t be impressed. But no one said what Amazon did was a major technological feat. In fact, the sheer number of startups who have actually done cloud storage and streaming shows that it’s not the technology that’s been the stumbling block — it’s the potential legal and business complications.

And that’s exactly why Amazon’s move was a big deal: The company decided that it was going to do it now and apologize later, assuming the sheer momentum and force of its will would be enough.

So while the company doesn’t have a first mover advantage in the technology sense, by moving first among the large digital media goliaths, Amazon has essentially established itself as digital and cloud media’s alpha dog.

In fact, you could argue Amazon’s behavior is part of a pattern, one which shows the company moving ever more aggressively, playing somewhat fast and loose with the rules (both in legal and business terms), in an effort to establish itself before its competitors or spurned partner reacts, by which time the company’s seeded the market.

Some examples of Amazon’s alpha-dogness:

  • The brower-purchase option on iOS devices. This way of skirting Apple’s app store was genius, and of course it was too good to last. But by the time Apple implemented its in-app purchase rule, Amazon had already established itself in a big way with Kindle for iPad.
  • Going DRM-free first. Remember, while Apple still dominants music sales, Amazon made itself a player (and grabbed second-place market share) by dropping DRM on its MP3s, a pretty radical move at the time.
  • App store with Test-Drive. By creating its own app store, Amazon not only ticked off Apple by using the term, but more importantly it decided to create an app store that was a real alternative to iTunes for apps as well as music.
  • Kindle e-book pricing strategies. Make no doubt, Kindle and Amazon’s e-book efforts to disintermediate publishers is by far their biggest move, as well as their aggressive moves to drop e-book pricing (which created the agency-model revolt that Apple helped along with iBooks)

Sure, these are disparate group of initiatives, but I think they’re all largely connected. In fact, the more recently aggressive behavior by Amazon in cloud streaming and app stores was a result of Apple’s app-store rules, something I speculated in February would result in Amazon looking to create an iTunes alternative, something which look to be fully intent on creating.

And while Amazon may be showing the most aggressive behavior of all the big digital media giants, there’s no doubt the other big dogs will bite back, and no doubt its likely to happen soon.

For more on Amazon’s first-mover advantage among the media giants and its relationship with Apple, see our latest weekly update over at GigaOM Pro (subscription required).

Image courtesy of Flickr user Beverly & Pack

15 Responses to “Why Amazon Is the New Digital Media Alpha Dog”

  1. Amazon is dishonest organization and cannot be trusted. They turned of DRM on books, and didn’t support older books after changing DRM. They cheat and screw over their employees. They crated “Amazon web services” and marketed it with the lie that they “run on it”. People believed them, but it was an absolute lie. They have been lying about the success of the kindle since the beginning, but nobody is in a position to audit them, though this should bring them before the SEC. They discriminate against employees, cheat them out of pay they are deserved, and lie to them as well.

    All of this is true and all of which can be proven in court, so I’d love for them to sue me.

  2. Some corrections:

    Amazon didn’t “[drop] DRM on its MP3s.” The MP3 spec doesn’t have any way to apply DRM and they never sold any kind of copy protected files. Also, when they launched, they didn’t have major label support, though they did get all of the major labels on board with DRM-free downloads before Apple did.

    The Amazon App Store is an alternative to the Android Market, not the iTunes App Store.

    • @Biz – Amazon was the first big online retailer to sell DRM-free digital music. That was my point and it still stands.

      The Amazon app store is in fact an alternative to iTunes in that its another channel for developers. I clearly understand its an App market for Android apps, but it gives Amazon more direct control to offer apps and compete against Apple. As a consumer, I can now possibly get apps available to me down the road that may have gone exclusive to Apple if, say, the developer now sees Android (with Amazon) as a more viable market to dedicate their resources to.

  3. You do understand that Apple wanted to do drm-free music but the labels didn’t let them until they agreed to higher prices? At the time it was thought that the labels wanted to hurt Apples market share which is why Amazon got the drm-free music.

    • You just proved my point. No matter the labels intention (which is, in my mind, somewhat debatable), Amazon did it first.

      Alpha dog: just do it, move fast and bite first, ask forgiveness later.

  4. While Amazon may be first, having it work is nicer. I tried to upload songs to the Amazon ‘cloud’ and the client program (written in Air) crashed midway, forcing me to reselect hundreds of songs.

  5. Very smart moves by Amazon. While technology is very important, the business move is even more. They did what Apple sis with the iPod. MP3 playes existed, but Apple came up with a better value proposition.

  6. It’s a good first step to cloud music, but it’s not enough. True cloud music is something like Spotify with a business model like Spotify, too, where you don’t get charged $1 per song, but you only pay a small subscription fee per month, or even get to listen to music for free, with some ads on the side. I hope Google will choose Spotify’s strategy, not Amazon’s, and they even have the Admob ads to integrate with it. Hopefully, the rumored $25 per year subscription fee is also true. I don’t think studios should worry too much about getting their revenues back because, through Android, Google could probably enable a lot more people to actually buy music all over the world (not just in developed countries) instead of pirating it.

    I think Apple will choose Amazon’s strategy. They have too much at stake to just radically disrupt their music business overnight with a small subscription fee. I see them making you still buy music from iTunes and then store it in the cloud, like Amazon does now. But who knows, they might use the monthly subscription model, too.

    One other point related to Amazon that I’d like to make, I wish Google would try to actually disrupt Amazon’s book business by making books free also, with Admob ads at the bottom of each page. It’s something that’s right in their courtyard, and it would be very hard for Amazon to copy this move because they don’t have an ad network. I’m sure it would be tough as well to convince the publishers to even try this, but if it would work it would change the book industry forever, and just think about what that could do to self-education. Plus, they could always start by offering this option to self-publishing authors, which by they way, Google should’ve offered by now. How do they expect to compete with Amazon or B&N when they don’t even have that yet? They also need a lot more titles and to make it international if they want people to take them seriously and actually use it. Giving the option to upload your own books wouldn’t be too bad either. Even Apple allows it with iBooks.

  7. And what share of digital music downloads does Amazon have after being first DRM fee?

    Yeah, I didn’t think so.

    They dominate digital books and are likely to continue to do so. Everywhere else, they have their tail tucked in between their legs.

    • Er.. thats not true. In 2010 Apples growth was 1%
      Amazon grew 4% to 12% of the overall US market. So hardly tale between the legs, they are doing very well.
      Not too sure why you needed to write your post with its anti Amazon sentiment. Amazon has helped drive digital delivery of books, and DRM free Music. Something we should all be grateful for.