Price war! Amazon launches 69-cent MP3 store for top-selling tunes [Corrected]
Amazon.com, which is a distant No. 2 to Apple Inc. as a retailer of downloadable music, has upped the ante or, rather, lowered its prices to compete with iTunes.
The Seattle online company is now pricing select top-selling tunes for 69 cents, down from 89 cents previously. Many of the songs in Amazon's 69-cent store sell for $1.29 on iTunes, including Katy Perry's "E.T.", Jennifer Lopez's "On the Floor" and Lady Gaga's "Born This Way."
Amazon, which in March launched a cloud music locker service, has tried over the years to chip away at Apple's dominance in the digital music download business by pricing most of its songs below what they go for at iTunes. So far, however, Amazon's market share remains where it has been the last two years, around 10%, while Apple continues to have about 70% of the digital download music market, according to Russ Crupnick, digital music analyst at the NPD Group, which no longer publicly releases market share data.
Last year, Apple hoisted the prices of hot new releases to $1.29 a pop, from 99 cents. While that made each sale more profitable, it also put the brakes on the total number of tracks sold last year, which grew just 1% in 2010, compared with an 8% growth in 2009, according to SoundScan.
With Amazon moving in the other direction on pricing, it's unclear which will eat the price cut -- Amazon or the music labels. Also uncertain is whether the move will create loyal customers for Amazon, rather than opportunistic cherry pickers, Crupnick said.
"The average music consumer spent $46 a year on digital music,"in 2010, down 10% from 2009, Crupnick said. "The question is not whether you can sell a 69-cent track. It's whether you can get a customer to spend $69."
The clear winners of this price war, of course, are music buyers. Ka-ching!
Correction: An earlier version of this post quoted Russ Crupnick as saying digital music spending was half of what it was last year. In fact, digital music spending was down 10% in 2010 from a year earlier.
-- Alex Pham