In a much anticipated move this week, Amazon (NASDAQ:AMZN) released Lady Gaga’s second studio album, “Born This Way” for ninety nine cents ($.99), through its online “digital download” service.
The pop-icon’s entire album was offered at the cost of just a single song purchase on competitor Apple’s (NASDAQ:AAPL) iTunes. iTunes also sold the new album to the digital market, but asked for a much steeper price of $11.99.
Initially the promotion was only slated to run for for one day (Monday), but demand was so high that Amazon servers experienced trafficking problems and stream delays, hindering some customers from purchasing the album. Yesterday Amazon decided to renew its offer to customers, and once again sales were wildly impressive. “Born This Way” is expected to sell over one million copies in the week of its initial release, the first album to do so since 2005, thanks in large part to promotional efforts from Amazon and other online retailers. Amazon reportedly sold over 200,000 copies of the album through its offers.
One Amazon (NASDAQ:AMZN) representative commented on the Gaga sales, saying, “[that was] the largest amount of interest we have ever seen for an album in just one day.”
Many speculate that the move from Amazon comes as part of a long-waged campaign to break into Apple’s (NASDAQ:AAPL) stranglehold on the market share for digital music downloads. The move was certainly not profitable for Amazon, as the company will take an estimated 1.2 million dollar loss from the promo. Bloggers are reporting that this is due to a wholesale deal Amazon brokered with Universal Records in which it agreed to pay $7 per copy of the album. Offering the album via digital download at $.99 represented a loss of $6 per copy for the digital retailer, leading many to question the strategic savvy of the move.
Unless Amazon (NASDAQ:AMZN) can prove to stockholders that it won a coup over Apple by snatching a chunk of the iTunes market-share, the move may be remembered as a monumental marketing blunder. With Amazon’s profits down 33% in the first quarter, some might question how much more cash they can bleed before investors start to raise concerns.