Will Walmart's Entrance Signal Download Store Price Wars?

from the had-to-happen-sooner-or-later dept

I've been wondering how long the $0.99/song price for music could hold. Already, some say that the dollar a song price is too much, and basic competition would suggest that the prices will get driven down over time. The floor at this point is the $0.67 that the labels demand from each song sold. So far, the various download stores have mostly (though not completely) held the line at a dollar. Sooner or later, though, you had to know that someone would realize they could get more attention by going lower, and who else but the leader in "everyday low pricing" Walmart? They're testing their new download store with songs at $0.88 per song. Hello, price wars! Of course, they know that they'll be losing money on this offering, but they see it as a loss leader to get people to buy other stuff at Walmart.com. So, if the price war continues, at what point will someone realize that, since they're just using the music as a loss leader anyway, they don't mind paying the $0.67 themselves. For example, Apple already says they're losing money on iTunes, but more than making it up on iPods. Wouldn't they sell more iPods if the music were even cheaper? It's an optimization question of "how low do you go?" until the cost of the music outweighs the benefit of selling more other stuff. However, if the music really is acting as incentive to buy other (high priced, high margin) goods, you'd think they'll eventually be willing to go pretty damn low.

Reader Comments

Subscribe: RSS

View by: Time | Thread

  1. identicon
    Anonymous Coward, 19 Dec 2003 @ 7:21am

    No Subject Given

    Think wally world (and mike) may be a bit overly optomistic here. I don't think that going on line to buy music a Wally world is going to encourage me to shop in their other areas. Unlike foot shopping, when I go online, I generally go with a particular focus... and if they shove so many ads in front of my browsing at music that it becomes intolerable and don't think many people are going to stay around.

    Point of reference for wally worlds online experiences. Everyone said their online movie rental would kill Netflix. Yesterday Netflix raised their revenue and subscriber numbers for the quarter. So far, wally world... little to no impact.

    Basic reason for this, I feel, is that the netflix experience (at least for me) has been flawless. Ergo, I've had no reason to look elsewhere. In the same light, my online music experience at apples itunes store has also been flawless. Do I really want to spend the time and effort looking for a less costly alternative (10 cents) unless it has the same experience ???? I think one thing most people will agree on, is that shopping at wal-mart (brick and mortar) is never equated to the word pleasant or easy or flawless. It does = cheap but seldom anything else.

    Now if wally world has that 'gee whiz' feature that itunes doesn't, it might be worth the time and effort of checking out.

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here

Subscribe to the Techdirt Daily newsletter

Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Insider Shop - Show Your Support!

Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Report this ad  |  Hide Techdirt ads
Recent Stories
Report this ad  |  Hide Techdirt ads


Email This

This feature is only available to registered users. Register or sign in to use it.