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iTunes has 66 pct of digital music market, Amazon 13 pct

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The original digital music store is still top dog 10 years later. iTunes still controls 66.2 percent of the digital market, according to an NPD report in WSJ. It’s biggest rival, Amazon, has a 13.3 percent share. However, those close to the record labels say iTunes dominance can get much higher. On some days, the Apple music store reaches almost 90 percent of the market, with Amazon holding onto a scant 6-10 percent. Is this healthy?

Though Amazon’s numbers are up a couple percent (it had 11 percent last year), the online store seems unable to crack the iTunes fortress. It isn’t giving up the fight, however. In 2010, the online retailer has been aggressively marking down album prices, selling new releases for as little as $2.99. ITunes, by contrast, sells most albums for at least $9.99 and some are priced as high as $14.99. In select circumstances the strategy has worked. Kid Rock’s new album Born Free was a heavily discounted Amazon exclusive during its first week of release and digital sales made up almost 12 percent of the 189,000 copies it sold. But success comes at a price. Amazon often takes  a loss on deeply discounted MP3s and the bargain hunting doesn’t seem to be helping Amazon MP3 capture any market share from iTunes. Amazon’s share may have grown 2.3 percent this year, but iTunes gained 3 percent.

Still, the digital music market is growing, but slower than CD sales are falling. Digital sales grew 13 percent this year as CD sales fell 20 percent. Digital singles have remained almost completely stagnant, while album sales, Amazon’s specialty, fueled almost all of this year’s growth.

Think outside the download, Amazon

Our best advice would be for Amazon to try something new. Why not lift some of the restrictions on MP3 downloads and also give users unlimited access to a cloud-copy of their music library? Imagine being able to purchase an album on your computer and instantly download it to your MP3 player, TV, or any other device with ease, much like the Whispersync service Amazon offers for Kindle books. Currently, you can download 1 copy of an MP3 song or album. If your Internet goes out midway through the download, good luck. The best way to combat digital music piracy (which is very healthy this year) and gain new customers may be to let them do whatever they want with the music they purchase. If only record labels and the RIAA would see the light.