Underdogs Amazon and Target take aim at iTunes and Walmart

Mon Dec 13, 2010 8:57am EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Ed Christman

NEW YORK (Billboard) - As music retailers suffer ever shrinking sales, some of the most aggressive moves to boost business are being made by the perpetual runners-up in their respective sectors.

The past year has seen heightened competitive positioning between Apple's iTunes store and Amazon for digital sales and Walmart and Target for CD sales. In both instances the latter merchant is bringing the fight to their larger competitor. Amazon batters iTunes daily with pricing promotions like the Daily Deal, while Target recently used huge marketing spending to challenge Walmart's dominance in country music.

AMAZON VS. ITUNES

The Amazon MP3 store's roughly 1.3% share of the U.S. music account base in 2009 (part of Amazon's overall 7.1% share) was dwarfed by market leader iTunes, which held a commanding 26.7% of the market, according to Billboard estimates.

But that hasn't prevented Amazon from becoming a thorn in the side of its much larger rival. Amazon's Daily Deal, the most closely watched element on the retailer's "Special MP3 Deals" page, has proved to be a powerful generator of album sales, especially upon the release of a new title.

For instance, Amazon priced Arcade Fire's album "The Suburbs" at $3.99 during its debut week in August, helping drive first-week sales of 156,000 (of which 97,000 were digital, according to Nielsen SoundScan) and a No. 1 debut on the Billboard 200. Meanwhile, Amazon priced Kanye West's "My Beautiful Dark Twisted Fantasy" at $3.99 on its November 22 release date, pushing first-week sales of 59,000 at Amazon, compared with about 163,000 at iTunes, according to sources, an impressively narrow gap given iTunes' larger market share.

Amazon's loss-leader pricing has helped it grow market share and transform itself from a catalog retailer to a potent force for new releases. While music industry executives acknowledge that Apple enjoys the enormous advantage of selling iPhones and iPods that seamlessly integrate with iTunes, they still wonder why Amazon's pricing strategies don't steal more business from Apple.

With its Daily Deal, $5 pricing on select albums and attractive discounts on many other digital and physical titles, Amazon is consistently the low-price retail leader for all music, including track downloads. Currently, it's pricing all hit tracks at 99 cents, except for those from Sony Music, which sets its own pricing of $1.29 on hit singles. By contrast, most hit tracks on iTunes are $1.29.   Continued...

 
<p>A patron uses his laptop while having an espresso at the Silver lake location of Intelligentsia Coffee and Tea in the Silver Lake area of Los Angeles October 19, 2010. REUTERS/Mario Anzuoni</p>