Amazon Declares Price War, Selling $.69 MP3s
Amazon is aiming to undercut Apple even more with many new chart-topping songs selling for $.69. These songs were previously priced at $.89, already well below the standard $1.29 for new releases on iTunes.
The move shows the two companies very different strategies in terms of their digital music downloads. Amazon, a distant second to Apple in sales, is attempting to make up market share (10% to Apples 70%) by luring customers in with low prices. Apple on the other hand is flexing its muscle as the industry leader by raising the price of new releases to $1.29 in 2010. However, the price hike came at a cost to their pace of growth. Digital music sales only increased 1% in 2010, compared to an 8% growth in sales in 2009.
Consistently lower prices haven't translated into increased market share for Amazon however. That 10% market share hasn't grown in the last two years. Apple's gigantic market share in the mp3 player, tablet and mobile phone markets have made any progress impenetrable. Most iOS device owners would rather stay within the iTunes and Apple ecosystem and pay more for a song than venture out to Amazon, even with considerably low prices. Plus the status of "free" for illegal downloads is tough to beat. And these users already have their devices integrated to their iTunes, which means those free songs bring them back into the iTunes ecosystem.
Its an obstacle Amazon will most likely never hurdle. Still, $.69 for a digital download is a steal, well besides free. Nothing beats that.
Source: LA Times