According to new third quarter figures issued by market research firm NPD Group, Apple’s iTunes music store now accounts for 66.2% of online music purchases, up from 63.2% in the same quarter last year. Apple’s biggest competitor in the space, Amazon, currently holds 13.3% of the market. Executives from major labels suggest the disparity could be even larger, with Amazon owning just 6% to 10% of the market while Apple’s share is nearly 90%. Pricing, often a major factor in retail sales, does not appear to have a major impact on digital music sales. Amazon’s strategy, beyond various distribution deals, is to undercut iTunes. Amazon’s average selling price for popular albums is significantly lower than the $9.99 to $14.99 Apple often charges, and even deeper discounts can be found regularly through promotions like “Daily Deals.” Despite Amazon’s best efforts, however, iTunes’ digital market share continues to grow and Apple’s service remains the global leader in music sales, having surpassed Walmart to take the No. 1 spot in 2008. More →
A recent report filed by Reuters aims to shed some light on how online retail giant Amazon plans to commandeer market share of digital-music downloads from Apple’s iTunes Music Store. The current state of music downloads in the U.S. has AmazonMP3 with a 1.3% market share, while Apple’s iTunes holds a 26.7% share. To try and narrow this market gap, Amazon is doing what it does best: deep discounting. The online retailer’s Daily Deal has been a huge success in boosting sales. Recently, the company offered Kanye West’s new album — My Beautiful Dark Twisted Fantasy — for $3.99 on its release date. Amazon reportedly sold 59,000 digital copies of the new album, while iTunes sold 163,000. The less than 3 to 1 gap in sales is notably impressive.
Not everyone thinks the strategy can succeed. A “senior major-label distribution executive” was quoted as saying, “Amazon is growing, but they are growing in millimeters,” and went on to speculate that the strategy “doesn’t seem scalable.”
Amazon does have a broader price advantage over Apple as new tracks sell for 99-cents on the company’s site; new tracks in iTunes sell for $1.29. Amazon also has 100 albums on-sale for $5 every month. What digital music store are you using?