On hearing the news that Amazon (AMZN) had put 2 million songs, free of copy-protection, for sale on its new MP3 music store, I — like nearly everyone else who writes about Apple (AAPL) — went straight to the site to do a cost-comparison with the iTunes Music Store. My choice: KT Kunstall’s Suddenly I See, $1.29 (without copy protection) from Apple, $.89 (also without copy protection) from Amazon, a 40% price differential.

Which raises an immediate question: why are they doing this?

Apple, which sells songs for $.99 a track (protected) and $1.29
(unprotected) probably makes a lot less on each download than the music
labels, which have been complaining loudly that they aren’t making
enough — at least for their most popular songs.

Steve Jobs of course, can look at the music as something like a loss leader. He’s
happy to make just a few cents profit per song as long as he’s cleaning up
on the 100 million or so iPods and iPhones we’ve bought to play them.

But EMI and Universal, whose intellectual property represent the
lion’s share of the music on Amazon’s new site, must be getting even
less from Amazon than they were from Apple. And having fought for years
to keep their music copy-protected with so-called digital rights
protection (DRM), they’re selling it on Amazon DRM-free. At a 40%
discount. What’s their motivation?

The smartest answer to that question I’ve seen was posted yesterday by David Kravets at Wired.com.  He heard Warner Music’s Edgar Bronfman, Jr., tell Goldman
Sachs investors last week that he was thinking about removing DRM
from Warner’s music downloads — a few months after suggesting
Warner would never abandon DRM. The money quote: "We need some online competition" for Apple’s iTunes Music Store. As Kravets explains:

The self-created headache for the industry is that the highly popular
iPod and new iPhone only play music protected by Apple’s proprietary
FairPlay DRM solution or music that isn’t protected at all. And Apple
chairman Steve Jobs has repeatedly balked at licensing FairPlay for use
on competing download services or devices.

That meant music companies had to choose between using iTunes
or going DRM-free. The industry stood by and allowed most of its
music-download sales to come from Apple.
Recognizing opportunities lost to Apple’s dominance, the music industry
is moving toward throwing DRM overboard in a bid to open up new retail
markets and promotional opportunities.

In other words, the labels are using the fire-sale of DRM-free music on Amazon to try to break Apple’s stranglehold on their business. It must be worth an awful lot to them to win a bit of leverage with Steve Jobs in future negotiations.

All
of this is great for the consumer, who now has two or three (if you
count Wal-Mart) places on the Web to shop for digital music downloads.

And it’s not even so bad for Apple. Sure there’s pressure on them now
to lower their prices (especially for EMI titles, which are available at
both Apple and Amazon’s music stores at a 40-cent per song price differential).
But since Amazon’s songs slide seamlessly into iTunes music libraries
and play beautifully on Apple’s hardware — which is where Apple makes its money — what’s not to love?

One last thought, again from Kravets’ Wired.com piece, quoting Bronfman on how dramatically Apple has disrupted his business:

"Never before in the history of content has the hardware been more
valuable than the software," Bronfman said. "You think about the VCR or
the video cassette — the video cassette always had more value than the
VCR that you shoved it into. Apple has been able to turn that model on
its head." (link)

Drastic disruptions apparently call for drastic measures.

Jogging for me has always been a form of exercise that sounds better than it feels, and judging from the numbers Steve Jobs offered last week on sales of the Nike + iPod Sport Kit, I’m not alone.

It’s been almost a year and a half since Apple (AAPL) and Nike (NKE) introduced the system that combines a small accelerometer  (embedded in a pouch in specially equipped Nike running shoes) that communicates wirelessly with a receiver plugged into the bottom of an iPod nano. iTunes keeps track of such things as elapsed time, pace and calories burned and issues celebrity congratulations (pre-recorded by the likes of Lance Armstrong and Paula Radcliffe) at the end of workouts and whenever personal best goals are reached.

The system is not cheap. The Sport Kit costs $29 and must be replaced when the battery runs out. The shoes start at $80 and can run as high as $140. The new 4 gig nano costs $149; the 8 gig goes for $199.  Before you take your first step, you’re already out a minimum of $258 plus tax. To keep you motivated, Nike has built an elaborate website with forums where runners can set goals, join distance clubs, ask questions and give feedback. Some of these forums are pretty lively. "Challenges," the most popular, has  racked up nearly 80,000 messages and more than 745,000 page views.

No wonder Steve Jobs bragged at the iPod special event last week that Apple had sold about one million Nike + iPod Sport Kits and that runners had logged more than 12 million miles on them.

That slid right by me. But Phil Leigh, president of Inside Digital Media, an avid runner, did the math and calculated that by Jobs’ numbers, the average runner has actually used the device for only 12 miles. Given the number of members in Nike+’s 100-mile, 500-mile and (gasp) 1,000-mile clubs, that suggests that a lot of people who bought or were gifted the Nike + iPod Sport Kit like the idea of running with it better than they like to run.

UPDATE: According to the constantly refreshed world map on Nike’s site, its members have actually logged, as of today,  more than 28 million miles. Either they got very busy in the past week, or Jobs got his numbers wrong. For me, just thinking about running 28 miles makes my knees hurt, but I suspect Phil Leigh is still not impressed. 

In a move timed to prepare customers for the 2007 holiday buying season, Steve Jobs today refreshed Apple’s (AAPL) entire line of iPod music and video players, from the tiny $79 shuffle to a new wide-screen iPod Touch — an Internet-ready device that is basically an iPhone but without the phone. "It’s one of the seven wonders of the world, it’s just incredible," Jobs told a crowd of about 1,000 analysts, journalists and bloggers gathered at San Francisco’s Moscone Center.

But he waited until the end of the program to announce a sharp price cut in the much-hyped iPhone, one that suggests that sales of the device may not be going as well as he hoped.

The event capped a week of anticipation and frenzied speculation, and although many of the rumors proved true — including spy photos of the so-called iPod "fatty" that Apple’s legal department ordered removed from several websites — the one many music fans cared most about did not: Paul McCartney did not appear live from the BBC and the Beatles are not yet available for download on Apple’s iTunes Music Store.

The new version of the iPod nano, Apple’s most popular model, sports a wider screen that can browse through album covers, play games and show movies and TV episodes downloaded from iTunes. A 4GB nano costs $149, the 8GB version is $199.

The new standard iPod – renamed the iPod Classic –  is thinner and packs twice as much flash for the buck as its predecessors, enough to hold up to 40,000 songs. The 80 GB model costs $249; the 160 GB is $349.

The iPod Touch, like the iPhone, has a 3.5 inch screen designed for fingertip control. Although it can’t make phone calls, it is equipped with Wi-Fi, which means users can wirelessly surf the Internet, download YouTube videos, and buy songs directly from Apple or from selected Starbucks coffee shops. There are two models: 8 GB for $299 and 16 GB for $399. They will ship later this month.

The dramatic price cut on the 8 GB iPhone, from $599 to $399  — and apparent (but not yet official) discontinuation of the less popular 4 GB model — took most observers by surprise. The price reduction looks a lot like a last-ditch effort to boost sales, which Jobs claims are still on track to hit 1 million units before the end of September. Many analysts had predicted that Apple would have reached that goal before now.

Om Malik points out that according to Apple’s return policy, customers who paid $599 for an 8 GB model within the past 14 days can can request to be reimbursed for the difference.

With reporting by John Fortt, who live-blogged the event at The Utility Belt.

[Photo Courtesy of Engadget]