C|Net published a very interesting story yesterday that suggests Amazon could be Apple's next competitor in sales of online music downloads. The story was penned by Evan Hansen, who looks at the opportunities and obstacles Amazon faces. From that article:

"This is a company that was a pioneer in online retailing," said Jupiter Research analyst Michael Gartenberg. "They have got to be looking at the iTunes Music Store and what has made it successful, and whether it makes sense to get into that business."

[...]

The simplest entry for Amazon would entail partnering with a third party such as Ecast , which has acquired distribution rights for some music and already provides download services for a number of other retailers such as Best Buy and Tower Records . But those services have so far failed to move much merchandise and would require a significant overhaul to match the ease of using the iTunes Music Store.

[...]

Although no other company matches Apple's end-to-end control, Web-based music retailers like Amazon may ultimately face a competitive disadvantage compared with companies that provide music software that runs in an application on the desktop. That could lead Amazon to seek a partnership with a jukebox owner, such as Microsoft, RealNetworks, AOL Time Warner or MusicMatch .

"Apple demonstrated that the jukebox is going to be the storefront," said MusicMatch CEO Dennis Mudd. "Anyone not married up with a jukebox will lose out."

Note the self-serving nature of Mr. Mudd's comments, but that's his job, so I am not blaming him. Besides, he is right.

There is more information in the full article, which I think a good read. In related news, Amazon recently dumped RealNetworks' technology for providing music samples, opting for a deal with the devil and his Windows Media Player 9 technology.

Amazon could certainly make a go of offering a competing product to the iMS. The company knows more about online retailing than most of the other online retailers combined, has the resources to provide a proper infrastructure, and the seeming ability to understand what customers want. Unlike some giant corporations with near monopoly-like control in their markets, Amazon earned its customers by giving them what they want.

That said, Amazon will fail as surely as all other online music services other than the iMS have so far failed if it adopts Microsoft's vision of how to sell music. It is very likely that Amazon agrees with this assessment, or the company may well have attempted such a service with Big Redmond technology some time ago. The problem is that this doesn't leave the company many options. Amazon could adopt AAC to its needs, as Apple has, but it needs support form portable music players, and a jukebox software maker to get all the pieces of the puzzle working properly.

Enter Apple: I think it quite obvious that Apple should actually work with Amazon to distribute an Amazon-branded version of the iMS. Apple needs to have some friends out there, and it's high time the bigwigs at 1 Infinite Loop started thinking about expanding through licensing, at least in this area.

This allow Apple to profit off of Amazon's work, and make no mistake that Amazon will eventually enter this space with or without Apple. With so many people out there working on aping Apple's achievement, Apple should work on getting some of the proceeds from at least some of those competitors, especially those who are most likely to get it right. Far from diluting Apple's influence, such partnering and licensing would expand the company's reach.

On a more immediate note, such a course would give Apple's technology more credibility with the Windows world, and it would also, perhaps bizarrely, serve as a nice endorsement of that technology for the Suits on Wall Street. Though Amazon is a fraction of Apple's size, the online retailer still has a lot of influence in the stock exchange of public opinion. Such a move would also help propel AAC into a dominating standard, which Apple needs in the face of Microsoft's attempts to ram its own Windows Media Player down the world's throats.

The partnering doesn't have to be one-way, either. I felt from the day iMS was launched that Apple should partner with Amazon to sell CDs through the iMS. Right next to the Buy Album button should be a Buy CD button, and the buyer wouldn't even have to leave the iMS to make the purchase. Let Apple get a little piece of Amazon's pie while turning the iMS into even more of a music-buying hub. Amazon already has all the tools in place to allow the sales to take place directly through the iMS interface (though there could be security issues of which I am ignorant). It would be a match made in heaven.

The time has come for Apple to think differently about this issue, and Amazon is the perfect company with whom to do so. The spoils are heaped on a digital silver platform for both companies to seize, and I fervently hope they can recognize that.