Remember Tower Records and Virgin Megastore, those enormous music store chains that were driven out of business in the past decade? When Tower filed for bankruptcy in 2006, employees were informed that besides the ailing music industry, the company's biggest problem was Best Buy -- the big box store would always undercut Tower on the week's big new releases. If Tower Records was selling the new U2 album for $11.99, Best Buy would price it $8.99. Sometimes, Best Buy would charge so little for a disc, the store would actually lose money selling it.
Best Buy knew what it was doing, of course: 1. CD bargains draw people into the store, where consumers hopefully buy a microwave or television or whatever big-ticket item earns Best Buy the biggest bucks; and 2. Rock-bottom prices would knock their competitors, the music stores that relied on big new releases to draw consumers and sell its catalog albums, out of business. In the end, Best Buy weathered the age of slumping CD sales thanks to their washing machines and home stereos, while Tower Records and Virgin Megastore became extinct. We figured the practice of selling albums for a loss was extinct as well.
However, the Amazon MP3 store is selling a handful of the music-industry-saving November 22nd releases, including Kanye West's "My Beautiful Dark Twisted Fantasy," for only $3.99, well below the average cost of a digital album. Is Amazon -- an Internet superstore not dependent on digital music sales for survival -- trying to do what Best Buy did: kill off the competitors and bring down iTunes?
"Dark Twisted Fantasy" isn't the only big November 22nd release selling for $3.99 on Amazon: My Chemical Romance's "Danger Days," Robyn's "Body Talk" and Ne-Yo's "Libra Scale" are all priced below the standard digital retail price in what seems to be a direct challenge to Apple's iTunes, easily the dominant digital music store. While iTunes may have exclusively scored the Beatles' MP3 catalog, its overall share of the digital music market has remained largely the same the past few years, while Amazon MP3 has experienced growth in that time span, thanks in large to their dramatic low pricing of new releases (Thanks to a promotional $3 coupon for Amazon's mp3 store, fans are scooping up these albums for only 99 cents).
But who is Amazon's price plan really hurting? While Amazon's move might only do minimal damage to iTunes' pocket -- at press time, the standard and deluxe versions of "Twisted Fantasy," priced at $9.99 and $14.99 respectively, rank Number One and Number Two on iTunes' Top Albums chart -- pricing the albums at $3.99 severely hurts digital music stores like eMusic, 7digital and the legal Napster. Those services, like Tower Records, depend on sales from the big-name releases to survive. There's no way they can compete in the long term when Amazon's MP3 store is selling the biggest albums for a loss. Soon enough we might be faced with a digital landscape of only iTunes and Amazon selling music online.
7digital is trying it's best to keep up with Amazon by pricing "Twisted Fantasy" at $5, which begs another question: How could Kanye's label Def Jam allow for this to happen? If everyone is buying the digital album for less than $5, who's going to actually purchase the compact disc, which gives the label far more revenue?
As the Village Voice's Sound of the City writes, it's probably Kanye himself who allowed "Twisted Fantasy" to be sold for so little on Amazon. Opening-week sales from Amazon's bargain pricing have helped give the Arcade Fire and Vampire Weekend unexpected chart-toppers. While Kanye likely would have come out Number One this week regardless of the $3.99 tag, it's clear that his goal now, as the self-proclaimed best artist alive, is to shatter this year's best seller, Taylor Swift's "Speak Now," for reasons you're probably well-versed in by now. Still, the $3.99 pricing continues a dangerous trend in the digital music market, and a formula that led to the death of the brick-and-mortar record stores.
- Best Buy
- Tower Records
- Virgin Megastore