Can Amazon’s Lady Gaga Discount Boost Competition With Apple?

Not in the long run, analysts say

In an effort to compete with Apple’s dominance in digital music sales, Amazon is luring in customers with a huge discount on Lady Gaga’s new album, Born This Way, released Monday. Amazon sold the album for just 99 cents on the day of its release—resulting in major downloading problems on the site—and will continue to offer it at an everyday price of $6.99, which is still considerably lower than its wholesale value of $9.

Despite Amazon’s lower prices, Apple’s iTunes Store had no problem selling $11.99 downloads of Gaga’s album, while a $15.99 extended edition actually became iTunes’ top seller. According to The Wall Street Journal, analysts say that Apple, as the leading player in the digital music market with remarkable consumer loyalty, can afford to offer nondiscounted music knowing that its legions of reliable customers will keep coming back.

Some music industry execs believe that while Amazon will have a hard time breaking into Apple’s share of the market—which is currently estimated at 90 percent—it could, at least, get a temporary boost from the Gaga promotion. But Amazon also can’t afford to take losses on every album by offering such steep discounts, and when it comes to selling full-priced albums, Amazon will have a hard time preventing otherwise faithful Apple customers—many of whom have been left with a bad taste in their mouths from Amazon downloading delays on Monday— mafrom returning to the iTunes store.