Amazon grew PPD business ~ $82 MM

Amazon's MP3 store was about 8% of the pay-per-download market in its first year of operation, and only about 10% of that business was taken from the iTunes music store. So Amazon made the PPD business as a whole about 7% bigger.

This info is per Reuters on Yahoo News, which positions the story within the iPod narrative -- Amazon as a failed iPod killer.

Amazon's moved about 130,000,000 tracks. Assuming the labels get the same $.70 price (rule of thumb, anyway) as at the iTunes store, and subtracting 10% for business that moved over from one store to the other, that means Amazon injected $82 million into the record business. About half of that probably went to Universal.

After other costs Amazon's net was probably pitiful. But, just like Best Buy's deal with Guns N Roses, the point for Amazon is to get customers into the store and then upsell to more profitable stuff, like electronics. The key to whether or not these numbers are winners from their perspective has absolutely nothing to do with whether they are killing the iPod.

Eyeballing the 8% figure, I see rough parity between non-iTMS downloads and non-Apple portable MP3 players. If you own an iPod you're buying downloads at the iTunes music store, if you own a Zune you're buying downloads at Amazon. So what Amazon has accomplished is to get (some) owners of non-Apple devices to enter the PPD market.


chart of market share of music player Music device market share numbers show 20% disparity between Amazon's store and non-Apple devices. That's probably upside waiting to be captured by Amazon.

Category: business 5 comments »

5 Responses to “Amazon grew PPD business ~ $82 MM”

  1. gurdonark

    I like amazon’s system, and I respect their ability to grow market share over time.

  2. Lucas Gonze

    They really executed nicely on this one. The implementation is reliable and usable, so I keep going back there.

  3. Amazon’s MP3 Store, One Year In: No iTunes-Killer, Probably Won’t Be | Peter Kafka | MediaMemo | AllThingsD

    [...] spent a brief stint at Yahoo after it acquired his startup, does some back-of-the-envelope math and concludes that Amazon’s store contributed all of $82 million to the music business, and that Universal collected most of that. That same math means that Amazon grossed all of $39 [...]

  4. Finance Geek » Amazon MP3 (AMZN) Not Killing iTunes Yet (AAPL)

    [...] spent a brief stint at Yahoo after it acquired his startup, does some back-of-the-envelope math and concludes that Amazon’s store contributed all of $82 million to the music business, and that Universal collected most of that. That same math means that Amazon grossed all of $39 [...]

  5. Carly’s Internet Marketing Blog » Blog Archive » Amazon creates MP3 online store

    [...] Yahoo (YHOO) after it acquired his start-up, does some back-of-the-envelope math and concludes that Amazon’s store contributed all of $82 million to the music business, and that Universal collected most of that. That same math means that Amazon grossed all of $39 [...]

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