Despite efforts from Amazon, iTunes remains the king of digital downloads

Wed, Dec 22, 2010


Apple scored a Coup d’état recently when they struck an exclusive deal with EMI to sell the entire Beatles catalog of music on iTunes well into 2011. The long-awaited announcement was just the latest chess move in the ongoing battle between Amazon and Apple for digital download supremacy. Well, let’s be clear. It’s not so much a battle as it is a game of “catch up to Apple”, and despite some aggressive marketing tactics from Amazon, the online retailer still can’t seem to put a dent in Apple’s iTunes armor.

The Wall Street Journal recently highlighted a number of initiatives undertaken by Amazon in an effort to eat into iTunes’ commanding digital download marketshare. According to recent data compiled by the NPD Group, Amazon’s share of downloaded digital music comprised 13.3% during the third quarter of 2011, up from 11% during the same quarter a year-ago. Some healthy growth? Sure, but Apple’s share extended out even further during the same time period, rising from 63.2% to 66.2%.

“Distribution executives at record labels,” the Journal reports, “say the disparity between the two may be even steeper, with Amazon commanding just 6% to 10% of the market in any given week, and Apple closer to 90%.”

So in order to fight the powers that be, Amazon has resorted to selling albums at basement level prices. Most recently, Amazon sold Kid Rock’s “Born Free” album for just $3.99. Rock’s album on Amazon subsequently accounted for 12% of the albums first week sales. Note, though, that Kid Rock remains one of the fewmainstream artists who remains stalwart in his stance not to sell music on iTunes.

But Amazon’s pricing of Kid Rock’s new CD isn’t an exception, it’s the rule. Amazon anti-iTunes strategy often involves selling top name artists at heavily discounted prices. Every day the site offers a “daily deal” where a full-length album is available for as little as $3.99. Notably, when a high profile artist is subject to Amazon’s daily deal, such as Kanye West’s “My Beautiful Dark Twisted Fantasy”, Amazon reportedly pays full price for the album (approximately $8) and is forced to swallow the loss.

While Amazon’s price cutting ways have worked wonders in other markets, digital downloads is proving to be one area where Jeff Bezos and co. are simply struggling to take even a small amount of sheen off the juggernaut that is iTunes. Certainly not helping matters is the installed base of iTunes, which has only grown considerably over the past few years thanks to explosive Mac sales and the fact that iPhone and iPod users need Apple’s music software in order to get their devices up and running. That being the case, the iTunes Store has effectively been able to infiltrate computers worldwide and become a household piece of software in the process.

It remains to be seen if Amazon’s pricing structure can really have a long-term affect on iTunes (doubtful), but a comical tweet from the indie rock group Fleet Foxes, relayed by the WSJ, is worth repeating.

“Been working for nine months on something that will sell for 3.99 on Amazon MP3,” the tweet read, “That’s about the price of a whoopie cushion.”

That it is, my friend. That it is.


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