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Amazon’s Daily Deal aims to take customers, market share from iTunes

December 14th, 2010 at 3:31 AM

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?

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