Wednesday, May 12, 2004

Wal-mart and digital music

Wal-mart has taken up the second spot in online music sales, after iTunes. One likely reason for this is that they price tracks at 88¢, rather than everyone else's 99¢. The NPR story on Morning Edition today remarked that this is Wal-mart's typical strategy: undercut on price by taking advantage of economies of scale. But how does that apply to digital music? Where are the economies of scale that Wal-mart is taking advantage of that are not available to other online music sellers like iTunes? It seems to me that digital music levels the playing field, so to speak. The overhead of selling and distributing music online includes application development, server hardware, bandwidth, etc., but it's not clear to me how Wal-mart has any advantage there.

Still, I'm glad to see what may be the beginning of price wars among digital music sellers. Like the commentator, I think the sweet spot for me is somewhere around a quarter a track.

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