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Amazon's Lady Gaga promo cost $3.2m, gave it 38% album share

updated 03:30 pm EDT, Sat May 28, 2011

Amazon took voluntary 3.2m loss on Lady Gaga MP3s

Amazon's two days of its 99-cent Lady Gaga album promo were costly but may have paid off in a market share battle with iTunes, both official and unofficial sources said Friday. Music industry contacts said that about 440,000 copies of the pop star's album sold in the two days of the promo, almost all of which were the less extensive but much cheaper sale version. Since Amazon was still paying Universal and Interscope the full $8.39 cut, Billboard estimated that Amazon MP3 took a loss of $3.2 million on all its sales.

The deal may nonetheless have given Amazon a significant if temporary spike in share for the album and the industry as a whole. Extra tips said that, based on projections, Born This Way will have started on the chart with 1.15 million copies sold, giving Amazon alone 38 percent of the copies. Apple is still expected to do well but would be much further back at 200,000 copies moved through iTunes, or about 17.4 percent. Best Buy was predicted to tie with iTunes while Target would hit 150,000 (13 percent) and Walmart would fall in at 125,000 (10.9 percent).

The Best Buy deal didn't include a promo that gave Lady Gaga's album away with a smartphone, since it wasn't an actual album purchase.

Amazon's move isn't likely to be repeated in the near future but may be a key to moving the company's largely static market share in the US. Its online music store has been growing and got 13.2 percent of US digital music at the end of 2010, but it has usually taken away share from smaller rivals, not Apple's 66.2 percent. Discounts at Amazon usually haven't been as deep and only recently escalated with 69-cent hit songs that again are likely to have been sold at a loss.

The strategy isn't uncommon at Amazon. Kindle books were also frequently sold at a loss until Apple pushed a switch to agency pricing, where publishers set the price, and companies steered the overall market away from price dumping and other techniques to gain share.



By Electronista Staff
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Comments

  1. The Vicar

    Junior Member

    Joined: Jul 2009

    +10

    Oooo, good idea!

    Lose your way to the top! Amazon should do this every weekend -- if they later ones are half as successful as this was, they'll be in bankruptcy within a year, but boy will they have market share!

  1. malax

    Fresh-Faced Recruit

    Joined: Aug 2006

    +10

    Genius

    It's like the old joke, "sure we lose money on every sale, but we make up for in VOLUME!"

  1. iphonerulez

    Fresh-Faced Recruit

    Joined: Nov 2008

    +3

    I'm sure the analysts are very excited that

    Amazon is stealing market share from iTunes. I'm strongly willing to bet that on Monday when investors here of this news, Amazon shares will jump and Apple shares will drop. There will be headlines of how Amazon is going head to head with Apple and beating them at their own game. I'm getting a sneaking suspicion that Amazon doesn't require high profitability to excite investors. That only seems to be an absolute requirement for Apple stock.

    I'm almost certain that losing profit for the sake of market share is a poor business model so why is this such a wonderful thing on Wall Street. The Windows netbook is a prime example of market share gone wrong due to profit losses and Wall Street was so unhappy that Apple didn't try to jump on that bandwagon. Of course, now that the Windows netbook market is in shambles, I didn't hear one analyst apologizing about their own stupidity for saying Apple should have entered the market. Now the gripe is as to why isn't Apple selling more iPads.

  1. facebook_Matt

    Via Facebook

    Joined: May 2011

    -2

    You guys aren't seeing it...

    $3.2 million for Advertising and a HUGE chunk of mindshare. That's kinda cheap.

  1. jazlow

    Fresh-Faced Recruit

    Joined: May 2011

    +13

    Ummm, you left out a HUGE part of the story...

    Amazon crashed while people were downloading their 99ยข albums. Some had to wait the whole day for the downloads to finish. $3.2 million spent on pissing people off... great business strategy. This will only help iTunes continue to crush the Amazon MP3 store. Oh, and they also sold people the censored version of the album which is further pissing off customers.

  1. SockRolid

    Forum Regular

    Joined: Jan 2010

    +9

    Just one word...

    Unsustainable.

  1. SockRolid

    Forum Regular

    Joined: Jan 2010

    +2

    But seriously. Amazon's pad will be a clear #2.

    If and when Amazon enters the pad computing market, they will win the battle for #2 behind iPad. They have content, they have hundreds of millions of accounts with credit cards, they have many years of experience delivering digital and physical goods to customers, and now they have experience with mobile hardware.

    If Android is around in the next year or two, any and all droid pads will be crushed by the Amazon "Kindle Pad" or whatever they call it. If Amazon wants to gamble that droid will survive the airtight Oracle lawsuit, the Kindle Pad could run droid. And it will crush Xoom, Galaxy Tab, and all other generic droid pads.

    Of course, Kindle Pad will always be a distant #2 behind iPad. But really, there's only room for two. iPad and one alternative. The rest will just fade into e-waste as a warning from history.

  1. boris_cleto

    Fresh-Faced Recruit

    Joined: Sep 2002

    +1

    They found people

    Willing to pay for that?

    This seems rather like the WFL giving tickets to homeless people to make their crowds seem bigger.

  1. cutmoney

    Fresh-Faced Recruit

    Joined: Jun 2008

    +2

    Wow, what a novel strategy!

    Who would have thought, lower your prices to almost nothing and you'll outsell the competition...amazing! If Dell sold $10 laptops for a day I would probably even buy one. I was one of the Amazon buyers for the album, I really wasn't planning on purchasing the album at all but I figured why not. It was my first, and likely last, purchase from the Amazon music store. Unless, of course, they have more .99c hot albums.

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