Challenges remain for Amazon digital music service

If Amazon is to grow aggressively, though, it needs to start poaching customers from iTunes. "There's an increasingly difficult challenge in getting new digital users," Crupnick said. "It's becoming a bit of a mature market. The easy pickings aren't there so much. The biggest challenge is trying to convince the person in the iTunes ecosystem to get out of it."

The labels hope that Amazon can do that next year. Piper Jaffray's Munster projects that Amazon's sales will surge 60 percent in 2009 to 208 million downloads. But labels believe that there's even more potential in the company's integration with MySpace Music and other companies like it. If Amazon can become the provider of choice for social networks aiming to sell digital music, labels say it could have an easier time challenging iTunes.

"Amazon was particularly interested in creating a seamless experience within MySpace Music," said MySpace CEO Chris DeWolfe, who added that more layers of integration are pending as the service evolves. "It's going to become more and more seamless (because) they were very serious about creating this experience and invested in it."

Amazon also made small deals this year. One allowed gamers playing "Grand Theft Auto IV" to tag songs in the soundtrack for later purchase on Amazon. Users of Google's G1 phone also have one-click access to the company's MP3 store, including integration with the popular Shazam song identifier application. Developing more such deals in 2009 will determine whether Amazon remains the leader of the also-rans or emerges as a real challenger to iTunes.

Reuters/Billboard