Digital Music Price-War: Amazon Dropping Prices to Compete with iTunes

Amazon fights an uphill battle when it comes to offering digital music downloads. Cutting their prices from 89 cents to 69 cents is one more way they're trying to take a bit out of Apple.

Apple's iTunes service is easily the Goliath in the digital download marketplace. Garnering approximately 70% market share they don't leave much of the pie for anyone else. Amazon already prices their songs lower than iTunes; trying to stab their way into the heart of Apple's operation. In cutting their prices another twenty cents a song, the hope is to make an even bigger dent in the marketplace while also driving business towards their cloud storage service.

The thinking process is that if they are able to get consumers over to their website to buy MP3s that could entice them to sign up for Amazon Cloud, a one-stop shop of sorts. Undoubtedly having a lower cost option for music buyers is good for competition and ultimately for those purchasing the music. However, is this like bringing a knife to a gun battle? iTunes is entrenched in the marketplace so well that when they raised the prices on a big portion of their catalog from 99 cents to $1.29 there wasn't any impact on Apple's sales.

Convenience plays as big a role in this as anything. The popularity of iPods, iPhones and iPads means millions of people are using iTunes to manage things like firmware updates. Already having their software open gives users and instant portal into their digital marketplace where one can find, purchase and transfer a song right to the device of their choosing in a matter of seconds. Unless and until Amazon, or any other Apple competitor can offer that level of convenience, anything else may just be a useless gesture.

All cynicism aside, it is noteworthy of course that Amazon's price point will be just under half of what iTunes is, so presumably if enough buzz is generated there could be an impact felt. Ultimately, the real measure of whether the price cut is a failure or success will likely rest on the number of subscribers Amazon garners for its cloud service thanks to the price cut. No matter what the gimmick or ploy, it will always be a fight to wrestle any market share away from iTunes, but the effort Amazon seems to be putting in lately may get them inroads, however small they may be.