Amazon Reveals Its Cloud Strategy: Bargains Galore

Amazon's servers were brought to their knees as fans of Lady Gaga clamored to buy digital copies of her new album, "Born This Way" for just 99 cents.

CNN is reporting that demand for this insanely low-priced full album has caused delays and server down time for the on-line retail giant. So it seems that Amazon has decided to show its cards as far as a strategy to get an upper hand in the battle of Cloud Storage Services. It's not clear whether Amazon will consistently price full-album purchases at prices that are lower than a lot of single track prices on competitor iTunes' catalog. However, the Lady Gaga sale was definitely a shot across Apple's nose.

The bargain basement pricing scheme also serves another purpose. At first glance any business model for Cloud services seems to be a pricey off-site hard drive, forcing you to buy music from whichever service provider you choose, rather than getting streaming access (in the vein of Pandora) to material. However, if Amazon is able to lure customers to their site and service by drastically slashing their prices, their Amazon Cloud could grow quite ominously dark over Apple's similar service.

Will Apply follow suit, accepting the challenge from Amazon? Apple has not historically bent to pressure from competitors as far as pricing goes. Their flagship products are priced to what suits Apple's bottom line, with their prices on computers, laptops and tablets being consistently higher than their Windows-equipped counterparts. This doesn't seem to have any effect on the success of Apple's products, however, so it's still unclear whether a price-war over digital distribution will garner any change in prices for iTunes.

It can be assumed that this move was likely a direct reaction to Amazon's uphill battle against Apple in digital sales. iTunes is so firmly entrenched in the marketplace, that perhaps the only way for Amazon to get a foot in the door is to start dropping prices to levels that consumers simply cannot pass up. It's unclear whether Amazon can or is even considering sustaining this price drop, but for the time being, it seems the message from Amazon to all others is "Game on."