Amazon Buys Audible for $300 Million

Amazon.com has begun a new chapter in its battle for customers' ears: it has agreed to pay US$300 million for Audible, a seller of audio books that has a close relationship with Apple.

Ten-year-old Audible sells spoken-word content such as audio books, magazines and radio programs through a number of channels, including its Web sites in the U.S. and U.K. It has 80,000 titles in its catalog, and a further 20,000 through partner sites in France and Germany.

Amazon began reselling Audible's content in 2000, and since 2002, Audible has also distributed audio books through Apple's iTunes Store, when it became Apple's exclusive supplier of spoken-word content. Apple modified the software in its iPods to allow "bookmarking" of Audible audio files.

This chapter in the battle for listeners may yet have a happy ending for Apple, as the Audible team plans to continue and grow its relationship with the iTunes Store, according to Amazon spokesman Drew Herdener. But that goes for Audible's many other channel partnerships too: "We plan to continue and grow all these relationships," Herdener said.

Apple declined to comment on the deal.

The main battle front between Apple and Amazon remains the sale of digital music free of the restrictions imposed by DRM (digital rights management) systems, where Amazon has been competing with Apple in the U.S. since September.

When Apple opened its iTunes Store, the music it sold was wrapped in a layer of DRM to prevent copying, which incidentally tied the music to Apple's iPod players and iTunes software.

Some record companies were unhappy that Apple limited the sales to its players in this way, and last May Apple began offering tracks from EMI without DRM for a small premium, later bringing the price down to the same $0.99 it charges for other tracks with DRM. Amazon joined the fray in September, selling music from EMI and Universal in MP3 format, without DRM, adding tracks from Warner to its catalog in December. It now offers 2.9 million DRM-free tracks, compared to 2 million DRM-free tracks in Apple's iTunes Store. Apple offers millions more tracks with DRM.

Audible's audio books are wrapped in a layer of DRM, which Amazon does not plan to remove unless customers start to complain, Herdener said.

"Each media marketplace has its own business dynamics," he said.

Amazon recently moved into the electronic book market with the launch of its Kindle e-reader, a device for downloading and displaying electronic books. Kindle also plays audio files, including those sold by Audible, making it a (much bulkier) competitor to the iPod.

The $300 million price tag for Audible includes the assumption of outstanding stock option obligations. The companies expect to close the deal by April.

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