NEW YORK (CNNfn) - Online retailer Amazon.com Inc. launched its online music store Thursday.
The Internet bookseller said it will carry more than 125,000 music titles on its main site.
The news drove Amazon (AMZN) shares up 2-3/4 to 56-7/8 in midday trading, slightly above its 52-week high of 56-1/4.
Amazon launched the music store on a small scale in April. With the full opening, the electronic commerce pioneer is primed to take on such established players as CDnow Inc. (CDNW) and N2K Inc.'s (NTKI) Music Boulevard in selling CDs over the Internet.
Although Amazon is playing catch-up to those companies, one analyst noted the bookseller's large customer base gives it an immediate advantage.
"CDnow and Music Boulevard have large aggregator contracts," explained Anthony Blenk, vice president at Everen Securities. "They have exclusive advertising deals with content aggregators like Yahoo!, Excite and America Online. That's what they need to get traffic. Amazon already has traffic."
According to Relevant Knowledge, a market research firm that measures Web usage, Amazon's site averages 4 million customers a day, while CDnow averages 1.8 million and Music Boulevard 900,000.
Amazon, which already offers discounts for its books, is also offering 30- to 40-percent discounts for CDs. Blenk noted, however, Amazon is not interested in getting involved in a price war that would harm its gross margins.
"Amazon has not made a point of being a price leader," he said. "Their point is they will match others' price and not let them use price as a differentiating factor."
Along with competing with other online music retailers, Amazon's move also makes for more interesting competition with Barnes & Noble Inc.'s (BKS) Web site.
"I think Barnes & Noble will begin offering (CDs)," Blenk said. "But the battle for book market share on the Web will be won or lost on the services provided for buying books."
-- by staff writer John Frederick Moore