Amazon MP3 swallowing heavy loss-leaders in fight for iTunes market share

Amazon's MP3 download ambitions continue to fall short of Apple's iTunes behemoth, with even heavy discounts and loss-leading sales failing to claw away significantly at their rival's market lead. According to the latest stats from NPD Group, Amazon clinched just 13.3-percent of the paid digital download market in Q3 2010, a 2.3-percent rise over the previous year, while iTunes' share climbed three points to 66.2-percent. However, Amazon has been forced to stomach expensive loss-leaders in order to make that increase: while Apple negotiates wholesale prices to suit its download deals, insiders tell the WSJ, Amazon generally pays around $7-8 wholesale for music it offers at around the $3.99 price point.

Meanwhile, record labels – though anecdotally frustrated by Apple's control over the market – suggest that Amazon is doing even worse than NPD calculate. Those the WSJ spoke to say Amazon may have only 6- to 10-percent of the market, versus Apple's 90-percent. Amazon is refusing to release details on how much return business it sees, but the strong tie-in between iTunes and Apple's iPod, iPhone and iPad ranges look to be keeping the company ahead of the game.