May 2, 2011, 4:07 PM

Amazon prices digital music for a song

Amazon cuts the price on popular songs to 69 cents, less than the iTunes price.

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Amazon.com has cut the price of more than 200 chart-topping songs to 69 cents, undercutting Apple Inc.’s pricing by 30 cents to 60 cents per song. Amazon also is offering 1,500 full-length albums for $5 each through May.

At the same time Amazon, No. 1 in Internet Retailer’s Top 500 Guide, is promoting the use of its Cloud Drive and Cloud Player tools, which it introduced earlier this spring. The e-retailer’s Cloud Drive lets Amazon customers store up to five gigabytes, or more than 80 hours, of their own MP3 digital music files in their Cloud Drive accounts for free. Consumers also can use their Cloud Drive accounts to store photos, videos or documents; storage for digital content purchased from Amazon is unlimited.

Customers can then use the Amazon Cloud Player to download and listen to music stored in their Cloud Drive accounts on any computer or Android-powered mobile device. Amazon says it lets consumers access anything digital from anywhere they want.

Analysts say Amazon doesn’t have much to lose in challenging Apple Inc., No. 4 in the Top 500 Guide, on digital music pricing. Investment firm Lazard Capital Markets estimates Amazon has about 10% of the digital music market, compared with about 70% for Apple’s iTunes. “We believe price is one part of Amazon’s multi-pronged strategy to boost its market share in digital media and introduce new customers to its media offerings,” write Lazard analysts Colin Sebastian and Gregor Schauer. “The opportunity still exists for Amazon to create a following with consumers who are not yet locked into Apple’s walled garden—if there are any left.”

Apple’s iTunes typically sells the latest hits for $1.29 per song; that includes some of the same songs Amazon is now selling for 69 cents each. Lazard Capital Markets says Amazon’s move to undercut competitor pricing is consistent with how the e-retailer introduced its Kindle e-books digital service and then put pressure on competitors by driving down prices. 

Sebastian will speak at the Internet Retailer Conference & Exhibition 2011 in a session entitled "How does Amazon do it? An in-depth look at e-retailing's pacesetter."

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