Apple iTunes Dominates Amazon in Digital Downloads: Report

Apple iTunes continues to dominate the paid digital-download market, outpacing'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,'s share rose year over year from 11 percent to 13.3 percent.'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'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 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'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, wrote 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's with e-books. As with'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 consumption.

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 albums.

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.