Amazon has launched an online music download store in Japan which offers over 11 million DRM-free tracks in MP3 format. Individual tracks are typically priced at ¥150 ($1.80) whilst albums may be purchased for ¥1,500 ($18).
The retailer has distribution deals with only one of the four major labels, EMI Music Japan. Sony Music Entertainment, the leading label in the region, reaffirmed its intention to stay clear of the DRM-free industry in Japan, where the digital market is dominated by mobile music.
Amazon has launched MP3 stores in the US in September 2007, UK in December 2008, Germany in May 2009, France in June 2009, and Switzerland and Austria in December 2009.
The Japanese digital music market has been declining in 2010 as mobile services, particularly ringtones and music videos, long the mainstay of digital music in the region, have begun to lose their luster. The units of digital mobile ringtones sold declined by 15.5% between H1 2009 and H1 2010, whereas mobile music video sales shrunk by 12.5 % in the same period. However, a la carte downloads of both albums and singles which have long been the preferred way of buying digital music in the West are broadly flat on mobile and growing online. Comparison of data from H1 2009 and H1 2010 indicates that units of online singles and albums have been growing (0.8 per cent and 13.1 per cent growths respectively) whilst a la carte downloads of single tracks from mobile have been experiencing a 0.6 per cent decline over the same period. It is into this small (12 per cent of the Japanese digital retail market is online) but growing section of the market that Amazon is launching, however there are a number of indications that the retailer may find it difficult to develop a significant business from its MP3 store in the near term.
Prior to this Japanese launch, Amazon's digital music downloads had been confined to the US and certain European markets, including the UK, France, Switzerland, Austria and Germany. Only in Germany has the retailer's music store gained popularity due to the comparatively small share of its main competitor, Apple's iTunes - iPod users made up only 31.8 per cent of Germany's portable media player (PMP) user-base in 2008. By contrast, in Japan, close to 51 per cent of the PMP user-base are iPod users. With over half of the users attached to the iPod/iTunes ecosystem, the Japanese market offers limited potential for standalone online services such as the Amazon MP3 Store.
The lack of a hardware-based ecosystem, coupled with a comparatively limited catalogue that only has major label content from EMI, will make it more difficult for Amazon to develop a significant market share. Behind this lies a philosophical difference between Amazon and the labels. Amazon has always followed a DRM free policy for its music store. When the retailer launched in the US in September 2007 it was without DRM and with content from EMI and Universal Music Group, with Warner Music Group and Sony Music following suite in December 2007 and January 2008 respectively. By contrast the mobile-skewed digital music market in Japan lacks the equivalent of iTunes's runaway success in the US. Consequently, the major labels lack the incentive to license content without DRM they had in Western markets, where the removal of DRM was seen as a way to help erode Apple's market share. Sony Music Japan, for example, has been openly hostile to DRM free services. But in places like Germany the DRM free approach, combined with an aggressive pricing strategy and typically value-conscious consumers, has helped Amazon develop a market share of 21.9 per cent.
Without the catalogue or a hardware-based ecosystem and operating in a comparatively small portion of the Japanese digital music market Amazon's MP3 Store seems likely to struggle for mass market success in the near term.