Apple iTunes continues to dominate the paid digital-download market, outpacing Amazon.com's share, but faces a major rival if Google launches a music service.
Apple's iTunes continues to dominate the paid digital-download market,
according to new data from research company NPD Group, comfortably outpacing
For the third quarter of 2010, iTunes' share of that market rose to 66.2
percent, up from 63.2 percent for the same quarter in 2009. Meanwhile,
Amazon.com's share rose year over year from 11 percent to 13.3 percent.
Amazon.com's aggressive promotions, including the $3.99 "daily deal" album,
may help it remain viable in the digital-download market. "If you look across
the board, we have been very competitive on price," Pete Baltaxe, director of
Amazon.com's 3-year-old digital music storefront, told
The Wall Street Journal Dec. 16
. That Journal article also paraphrased
record-label executives as saying that, "in any given week," Apple's share of
the digital-download market could rise as high as 90 percent, while Amazon.com
holds onto between 6 and 10 percent.
Lower prices can kill a product's profit margins, while benefiting the
seller with increased awareness and market share. Falling prices for
Amazon.com's Kindle, for example, could be offset by more consumers purchasing
both the device and the profitable e-books that run on it.
"With these cuts, eBook readers from Barnes & Noble as well as Amazon
now are priced at about the breakeven level with their Bill of Materials (BOM)
and manufacturing costs," William Kidd, an analyst at research company iSuppli,
in June after yet another round of e-reader price-slashing
. "With zero
profits on their hardware, both these companies now hope to make their money in
this market through the sale of books."
Digital media is a different game, however, and one in which Apple's
ecosystem may hold an advantage in the same way as Amazon.com's with e-books.
As with Amazon.com's integrated hardware and software offerings for e-reading,
Apple's iTunes, iPods and mobile products present a seamless way for users to
purchase a piece of media and download it immediately to their device for
Apple has lately moved to tighten the integration of that digital ecosystem.
In September, CEO Steve Jobs unveiled a new version of iTunes with a social
network "all about music" called Ping. That service allows iTunes' 160 million
registered users to share information about their favorite artists, songs and
During that same presentation, Jobs unveiled a revamped line of iPods with
substantial hardware and software upgrades, including an iPod Touch with a FaceTime
videoconferencing application. Apple claims that more than 120 million devices
run its iOS mobile operating system, with 230,000 new activations per day.
Google has also been moving to offer digital music downloads. In September,
Reuters reported that Google was in talks with music labels over an online
download store and digital song locker. "We don't have anything to announce at
this time," officials at the
search-engine giant told eWEEK
. Paired with Google e-books and other
multimedia, such a music application would allow the company to offer an
ad-supported media cloud capable of challenging Apple.