Amazon, eMusic Buyout Discussions Unsuccessful, Sources

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Acquisition discussions between Amazon and eMusic have now fizzled, according to sources close to the negotiations. The potential deal would have seen Amazon acquire eMusic, a popular MP3-based destination, and use it as an entry point into the digital music market. However, insiders have pointed to a lapsed exclusivity window between the two companies, which may have played a role in the deal falling through.

Despite the failed acquisition talks, eMusic’s parent company, Dimensional Associates, LLC, remains committed to its eMusic property. Sources close to the company have confirmed that they are not seeking outside funds and that rumors of changes at Dimensional Associates are unfounded. An eMusic representative declined to comment on the acquisition talks, citing confidentiality agreements, but did express optimism following a move away from DRM-protected downloads by major label EMI.

The failed acquisition raises questions about Amazon’s digital music strategy. Though speculation has circulated for years that Amazon would enter the market, nothing concrete has materialized. The potential acquisition of eMusic would have solved some of the DRM issues that have prevented Amazon from entering the market, as eMusic offers largely independent content. However, eMusic’s limited library of major label content may have been a sticking point for Amazon, as major labels still broker in protected content that is not compatible with the iPod.

One executive noted that Amazon would love to enter the market ahead of the holidays, but the company’s launch strategy remains unclear. According to sources, Amazon has sought alliances with hardware manufacturers in the past, but has been unable to make the numbers work with anyone. Others have criticized Amazon’s push into the digital music market as uneven and “stop and start.” “They are unsure of their plans, and very confused,” one source noted.

Despite the challenges, Amazon’s entry into the digital music market could be a game-changer. The company has a massive distribution network and a loyal customer base, which could give it a significant advantage over competitors. However, the company will need to navigate the complex landscape of digital music rights and licenses, which can be a difficult and expensive process.

One potential strategy for Amazon could be to focus on streaming music services. The company already offers a limited streaming service for Amazon Prime members, which could be expanded to include a larger selection of music. Amazon could also consider acquiring an existing streaming music service, such as Pandora or Spotify, which would give the company an established user base and existing licensing agreements.

Another potential strategy for Amazon could be to focus on independent music. By acquiring or partnering with independent record labels, Amazon could offer a large selection of high-quality, non-DRM music that is not available on other platforms. This could be a unique selling point that could help Amazon differentiate itself from competitors.

Ultimately, the failed acquisition of eMusic may be a setback for Amazon’s digital music plans, but it is unlikely to deter the company from pursuing other opportunities. With its massive distribution network and loyal customer base, Amazon has the potential to become a major player in the digital music market. However, the company will need to carefully navigate the complex landscape of digital music rights and licenses to achieve success.