Amazon invests in music service

IDG News Service - Amazon.com Inc. has invested in an online music service in advance of launching its own digital music store.

The online retail company invested an undisclosed sum in Amie Street Inc., which runs a Web site that sells music at varying prices based on demand. Artists upload their songs to the site and the first few customers can download the song for free. As demand grows, the song's price rises, capping at 98 cents.

The songs on Amie Street come without digital rights management software, a concept that Amazon.com appears to like. When Amazon.com announced in May that it would open an online digital music store later this year, it said that the songs would be DRM-free.

Amie Street aims to combine online social networking with music sales. When users recommend songs to friends, they receive credit for buying more songs on the site. The more popular the song gets, the more credit that user receives. Users can also post reviews and recommendations about songs on the site.

Amie Street shares 70% of the sale of each song with the artist, but it keeps the first $5 in sales to cover its own costs.

The concept of varying prices for songs is contrary to the model in iTunes, the most popular online music retailer. Songs in Apple Inc.'s iTunes cost 99 cents, except for DRM-free songs, which cost $1.29. That has been at odds with some record companies that want to use a varied pricing model. Apple, however, has held firm to its pricing plan.

When Amazon.com announced that it would launch a store, it said that it would sell songs from EMI Music and thousands of other labels. The DRM-free concept may prevent the online retailer from scoring deals with all the major record companies, some of which have yet to sell their music without the software.