Not sure Amazon will ever compete with iTunes without a serious strategic change. I use Amazon for a lot but never consider them for music. Too easy to buy on iTunes.
Amazon Can't Dent iTunes
On the day Apple Inc. rolled out the Beatles' catalog on its iTunes Store, Amazon.com Inc. fired back with a digital exclusive of its own: The latest album from rap-rocker Kid Rock—whose music still isn't available on iTunes—for just $3.99.
Such steep discounts are a cornerstone of Amazon's strategy to gain traction in a market in which iTunes remains the dominant player. At the same time, a debate has arisen among music labels about whether such discounts risk undermining the value of their products.
Despite its cut-throat pricing, Amazon has made little headway against Apple, which closely ties its iTunes software to its iPods and other gadgets. Amazon heavily markets its Kindle e-reader with TV commercials, but its MP3 store has a lower profile—the company markets it, largely, through emails to customers and a Twitter account where it highlights deals.
Amazon's share of the paid digital-download market rose to 13.3% in the third quarter, from 11% the year earlier, according to estimates from research firm NPD Group. Meanwhile, iTunes' share rose to 66.2%, from 63.2%.
Distribution executives at record labels say the disparity between the two may be even steeper, with Amazon commanding just 6% to 10% of the market in any given week, and Apple closer to 90%.
But Amazon's discounts can be effective. In the case of the Kid Rock album, "Born Free," digital downloads made up 12% of the 189,000 copies the album sold during its first week—even though the album wasn't available on iTunes.
Amazon, which has been selling music CDs for 15 years, began selling digital music in 2007—four years after Apple. Initially, Amazon sought to compete with iTunes by selling songs without copy protections, and by charging 89 cents for many single songs at a time that Apple charged 99 cents.
Eventually iTunes took away copy restrictions and now offers songs at three prices: 69 cents, 99 cents and $1.29. Amazon's price on most single songs has settled at 99 cents.
Today, Amazon competes with iTunes by aggressively discounting whole albums. Every day, the site features a "daily deal" album often sold for $3.99.
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