Digital music price wars begin as Amazon squares up to iTunes

8 Apr 2009

A virtual price war has erupted in cyberspace, with online retailer slashing the price of top MP3 downloads to 29p, in response to Apple’s iTunes decision to implement a three-tier pricing system.

Yesterday, Apple revealed that there will be three new price points for songs on iTunes, at 69 cents, 99 cents and US$1.29 respectively.

Until now, songs on iTunes were priced at 99 cents, but the music industry wanted more creative pricing that would give consumers greater choice and give the industry better returns.

More than 30pc of the industry’s revenues every year are attributable to the sales of just several top-selling albums, and labels want to charge more for premium songs.

However, retail giant has decided to add fuel to the fire by slashing the price of more than 100 tracks – including Lady GaGa’s Poker Face, Oasis’s Wonderwall and Neil Young’s Keep on Rocking in the Free World – to just 29p.

Amazon, which also sells albums for just £3 sterling, wants to make the price reductions indefinite.

All of this signals Amazon’s intent to be a leader in the legal music business.

However, it will have its work cut out for it as iTunes, with an installed base of 110 million iPod devices and 17 million iPhone devices worldwide, has sold over six billion songs since the service first launched in 2003.

By John Kennedy