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Amazon.com is setting its sites on iTunes with the release of its new DRM-free music download service

Amazon.com is expanding its digital offerings with a new music store, Amazon MP3.  The store is considered highly anticipated, due to Amazon's high profile, despite the cluttered nature of the online music market.

The early version of the store launched this week, with an initial catalog of over 2 million songs.  The store is expected to directly compete with iTunes for online music dominance.

Singles on the new service are cheaper than iTunes -- sometimes.  Songs run from 89 cents to 99 cents, an Amazon claims in a statement that more than half of the 2 million songs priced at 89 cents.  The company guarantees that its top 100 best sellers will remain at 89 cents.

Amazon signed deals with Vivendi owned Universal Music Group, the largest record company in the world, and EMI, another major record label.  Altogether, Amazon claims it secured more than 20,000 record labels.

Users can download tracks from the new service in 256 kilobit per second VBR MP3 format without any copy protection: all music can be readily played on just about any MP3 player, including Apple's iPod family.  This move marks a departure from DRM-protected iTunes and recently launched ad-supported download service SpiralFrog. 

Universal Music Group is not happy in its relationship with Apple and voice its anger today in the headlines.  With its new deals with Amazon and SpiralFrog, UMG appears ready to jump ship from iTunes.  There may be no time like the present; NBC Universal pulled all of its iTunes offerings earlier this month specifically to move to Amazon.

Apple recently announced its three-billionth download since its debut four years ago; Amazon is the fifth largest audio CD vendor even without digital music downloads.

However, Amazon might not be the only DRM-free service in town for long.  Earlier this year Steve Jobs pledged to reduce DRM on its high-quality audio tracks.  These tracks cost more than Amazon's offerings ($1.29 versus $0.89), but if Apple is any indicator, eventual winner of this arms-race will be the merchant with the best labels, not the one with the least DRM.




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