Wal-Mart Offers Cheaper Music Downloads

[Kent Pribbernow]

<div class='os_post_top_link'><a href='http://www.pcworld.com/news/article/0,aid,115846,pg,1,RSS,RSS,00.asp' target='_blank'>http://www.pcworld.com/news/article/0,aid,115846,pg,1,RSS,RSS,00.asp</a><br /><br /></div>"Wal-Mart recently launched its own online music downloading service at <a href="www.walmart.com">www.walmart.com</a>. Buying from the discount king may not offer the cool cachet of using Apple's superslick ITunes store, but the lower prices--per song as well as per album--can add up over time. To compare, we tallied up the cost of buying the songs and albums of Johnny Cash, our favorite man in black."<br /><br />Ah! A price war. But will Apple try to compete? I doubt it, and this illustrates the Achilles heel of Apple's business model: customers are locked into iTunes. As an iPod user, you don't have the luxury of choosing a different online music service. And, in this case, you also do not receive the benefits of competition. While Wal-Mart lowers its prices, Apple remains steadfast. Although the difference in pricing between iTunes and Wal-Mart (a mere ten cents per track) is hardly a gulf, it could be harbinger of things to come. If Napster, BuyMusic.com, and MusicMatch follow suit, will Apple continue to remain firm on its pricing? <br /><br /><br /><img src="http://www.digitalmediathoughts.com/images/115846-2206P034_3B.jpg" />

[James Fee]

If Napster, BuyMusic.com, and MusicMatch follow suit, will Apple continue to remain firm on its pricing?
WalMart and to a lesser extent Apple can offset their costs on the music store with hardware sales. The other 3 cannot.

[piperpilot]

I say hurray for Walmart. A healthy dose of price competition is just what we need. :D

[Mojo Jojo]

Mixed thoughts and opinions from me.

First I like the idea of cheaper music, at least my wallet does. BUt then the other side of my brain pops up with some nagging thoughts.

First being, I don't think any of us can say that Apple DOESN'T want to lower prices, nor do I think that we can say that they would either. From different posting and news articles, what I gathered is that to make the iTunes store happen Apple had to sign a contract with the music companies to sell the songs at a specific price for a designated amount of time. Without the clout of Wal-Mart behind them Apple may not have been able to reach a lwer price point.

All the articles I have read is that iTunes does not MAKE money for Apple, the sales of iPods do. If we are to believe that then any lowering of prices would only eat into their maintence costs, thus turning iTunes from a self sufficent/ break even to a generated loss.

So this price competition would only benefit Wal-Mart, not the consumer. Wal-Mart has deeper pockets (so does Microsoft) so they could win a price war and make it not profitable enough and force other companies out of the market or to not enter it.

Secondly other articles have noted that Apple has fought against the RAISING of prices that the music labels wish to do, from 99 cents to 1.25. At this point in time is it not the record labels that have more control over prices then Apple does? Are the record labels the digital music world's OPEC?

I think we should take a step back and look at this competition from outside our wallets and not pick on Apple least we get forced into getting our music, with sensorship and sometimes not at all, from the large chains like Wal-Mart.

In the end price wars have a short term consumer benefit, but if the price drops below a certain point companies can not make it a viable business practice to be in. Remember the internet browser wars?

People may not like Apple, and I am fine with that. But price shouldn't be the bottom line. Please also compare sensorship rules, DRM practices, quality of service, and music variety when making comparisions as things are not an Apples to 'Apple' comparision where price is the only difference.

[piperpilot]

I think we should take a step back and look at this competition from outside our wallets and not pick on Apple least we get forced into getting our music, with sensorship and sometimes not at all, from the large chains like Wal-Mart.

Only a government can censor. A private company is free to exercise whatever content discretion it pleases.

I think you have a point about not knocking Apple too much. But I think both the iTunes and the Walmarts have a role to play and each serves a very different market. For example, I don't have an iPod and quite frankly, don't want one. I have an iPAQ 5455 with a 1GB SD card that I use for listening to music. To me, it seems redundant to carry around two different devices (iPod and iPAQ) to use for the same purpose. I choose the iPAQ because it does much more than simply play music. Because of that decision to carry one device, I am effectively prohibited from using iTunes. The only device (other than a PC) that iTunes are compatible with is the iPod--that's what I don't like about Apple. Anyway, I use Napster because it uses the WM format and thus is compatible with any device that utilizes WMP, including my iPAQ. So, like I said, there's room in this market for both and that can only be a good thing.

[Mojo Jojo]

The only device (other than a PC) that iTunes are compatible with is the iPod--that's what I don't like about Apple.

and

...customers are locked into iTunes...

I won't try to disagree with these thoughts. To some extent they are true. Sure I could say that iTunes can be set up to use MP3, and you can move MP3 to most players universally but I can not argue that downloads from the iTunes Music store are locked into AAC. That is true.

What I ask is this... are you any less 'Locked In' with windows WMA? Your still bound to that DRM and format. Is the WMA 'Jail' just a bigger cell? Sure there might be more players but your still bound to that player type. Yes you could play a WMA file on a windows Pocket PC, but could you play that WMA on a Palm type device?

I think we all look at this from our own points of view, myself included. You have windows based items, PDA's, other music players, etc... so WMA is more attractive then AAC. Myself and others have Apple computers, and iPods so iTunes and AAC look good to us.

Looking at that dead horse over my shoulder there, I think we are all remembering ideas and convience of things like regular CDs, Tapes, and Records where players where universal. There wasn't this tied to equipment issue. So truthfully, the DRM and companies are ripping apart the audience as they try to grab a bigger part of the pie and profit. As the saying goes, any company saying they are helping the consumer is a lie.

(Oh, thank your for the correction on the spelling. My spelling skills are horrid. :) Just a note though censoring according to Merriam-Webster is any group that exams items in order to suppress or delete anything considered objectionable. It isn't just related to governments.)

[ale_ers]

Is the WMA 'Jail' just a bigger cell?

What a great analogy. I for one am a member of the WMA camp because I can listen to Napster purchased songs on my Media Center, Flash Player (for jogging) and my Pocket PC. While this gives me more flexibility, as you said I am still in “jail,” with the only way out to burn and re-rip. For the time being this scenario works for me, but what will be the next must have player. Will it be a hard drive in my car that automatically syncs via Wifi (they have those)? Will it be a Portable Media Center? And more importantly what DRM will it have.

I don’t have a problem with DRM. As I mentioned, everything works fine on my MCE, Flash player and PPC, but one camp needs to win the war so we will not be limited in the future. Wasn’t it so much easier when we stopped having to worry about Betamax vs. VHS? Would your ipod lose any value if you could now play AAC as well as WMA (I think it would gain value)?

For now WMA might be just a bigger cell, but it might be a safe bet that it will continue to get bigger in the future.

[Mojo Jojo]

Would your ipod lose any value if you could now play AAC as well as WMA (I think it would gain value)?

I agree, my iPod would gain a lot more preceived value in the minds of all digital music oriented people if it also played WMA files. But we come back to the business side though... why should Apple concede when they currently have the winning 'hand' and add WMA support, isn't that helping the competition if Apple desires to be dominat? (70% of all players from what I read) Also if Apple adds WMA then Microsoft should make a jukebox for Apple OS, and WMA players need to add AAC to their players (iRiver, Creative, etc).

So if we step away slightly and look at this by numbers... could you say this debate is like BetaMax (WMA) saying the VHS(Apple AAC) group should switch?

Anyways, yes there needs to be an digital standards group that sets forth the guildines much like what happened for CD's for these things to become standard. We might want to try a new thread so this one doesn't derail from the lower price topic of Wal-Mart. :D

[ux4484]

Not patronizing Apple isn't "knocking" it, if you perceive it as a better value for cool factor and selection, that's a personal choice...but not one that would sway MOST consumers compared to price when the same song/CD is available for a few bucks less. In example: (IMO) A VW owner is more likely to own an ipod and use iTunes than a Camry owner (who most likely owns a Dell player and uses a lower cost music service).

While I have browsed the iTunes library more than a few times, I never bit, for now I'll stick with Wal-Mart and MusicMatch.

[ux4484]

So if we step away slightly and look at this by numbers... could you say this debate is like BetaMax (WMA) saying the VHS(Apple AAC) group should switch?

heh...I would reverse those comparisons as Beta was the better quality and VHS was lower cost...but really that's even a moot point here. Do AAC songs actually sound any better than a WMA at the same compression? On this we're talking perceived quality and value.

VHS/Beta
Palm/PPC
WMA/AAC

The better perceived value for the consumer usually wins...and I don't think Apple really wants to win, they just want their established niche for those who are willing to pay more for their cool.

[Mojo Jojo]

...I would reverse those comparisons...

Actually what I was going for was group size in the Beta *VS* VHS thought. After VHS took hold and grew.

My thoughts where that Beta(WMA) was first and had more players (sorta a quality in availability quantity) then came VHS(Apple AAC) and the market went that direction (currently 70% of sold digital music players and to simplify things say the other 30% is WMA). At this point in the game to me it is the smaller number trying to get the larger number of people to switch.

To be blunt the smaller number that is locked into a specific format want to see their investment stay alive, so the debate takes many forms all in an effort to 'sling mud' or 'bring down' the larger group;

Media Prices
Which may be out of control of the lead group due to contracts for the time being as well as larger corporations being able to get a lower starting point from the music labels.

Device Prices
I can only speak from my experiences. I own personal computers from both sides. Sure I payed less for my MS machine then my Apple. However I have lost data when my hard drive died, had a faulty motherboard, had a faulty ethernet card, lost time due to viruses even though I had an up to date antivirus program where my Apple computers which I have been running for about five years now haven't had a single glitch. I'll pay that extra for dependability. Speaking of my iPod... I still have my first generation and it is going strong.

Open Formats
Which means it doesn't play the smaller groups choice of DRM... but the reverse is also true in that the smaller group does not play the larger groups DRM either so the point in my mind is moot.

Locked in DRM media
Neither side wins because it is the same argument. Neither side can remove the DRM without a lot of effort and loss of quality.

You can't stand me in a river and tell me my feet aren't wet. You can't tell me that WMA is more popular when just shy of 2/3rds of the music player sales are not WMA players.

And last, it has been nothing but blue skies for my digital music choice when switching to new computers, buying music, sharing music on my network, carting along my music library into the car, so your going to have to try very, very, very hard to sell me on why WMA which has been out now for a lot longer will suddenly out of nowhere leap out from their near stagnent acceptance growth to become the market leader and possibly the future standard.

[piperpilot]

You can't tell me that WMA is more popular when just shy of 2/3rds of the music player sales are not WMA players.

This may be true for dedicated music players, but I suspect the numbers are closer together when you consider people who are using multi-function devices (i.e., PDAs) to listen to music rather than stand-alone music players.

[Mojo Jojo]

Been re-reading a lot of my posts and I have to apologize. I must sound like a raving lunatic when I am just really passionate. Please don't take my posts to be attacks or blind following of Apple products.

I tried the PDA route with my iPaq but with the memory dwingling fast after installing programs I was left with room for about 5 songs that I could have. The slow times using the Windows Media player to transfer them so the DRM would work... the thought of spending another 100-200 for a compact flash expansion at the time... well it wasn't for me. :)

I went with a used option for the same price and went to a dedicated player and it has been great. I am passionate now because before this I didn't think digital music files were for me, but then I tired the iPod and was hooked.

I still believe Apple should have rentals, place a deposit on a computer or iPod, rent for a week and try it out. But they don't and people are hesitant to try Apple products because they are already invested in the MS world making it a risky proposition.

I think my efforts may have given out wrong or ill feelings so I think I will mosey over to the corner and return to lurking status :) If you have a question about Apple just post my name in a thread. I'll most likely be reading it and will pipe up with comments when I can.

[piperpilot]

I think my efforts may have given out wrong or ill feelings so I think I will mosey over to the corner and return to lurking status :) If you have a question about Apple just post my name in a thread. I'll most likely be reading it and will pipe up with comments when I can.

Not at all. I appreciate the passion. I am very passionate about my iPAQ. It goes everywhere with me and I use it for everything I can. So believe me, I know about passion :D That said, however, I still try to maintain an open mind about these things and perhaps someday, I may even buy an iPod. I'm just not there yet. Having a 1GB SD card for the iPAQ solves that pesky little problem of not having enough memory for a lot of music. :wink:

[Jason Dunn]

I think my efforts may have given out wrong or ill feelings so I think I will mosey over to the corner and return to lurking status :)

Please don't. I quite enjoyed reading your posts, even if I didn't completely agree with them. Part of having a thriving online community is having people of different opinions express them in a thoughtful manner, and having discussions around that. Lurking only makes it feel empty in here - what I want to see is more posting. :D

[Felix Torres]

Dunno if this can be properly considered a price war, guys...

For a proper price war you need two or more vendors fighting over the exact same customers and that is simply not the case here.

The two players in question, Apple and Wal-mart, have very different reasons for setting up their music dowload operations and they are most definitely *not* going after the same market.

In fact, neither of the two players being discussed really cares about the music they're dishing out. They're both using music to further other goals:

for Apple, it is straightforward; the want to sell iPods and they need for iPod to have a robust source of legal music to play. Thus iTunes.
Since they need to reach out beyond the 3% of the market that uses Macs, they put iTunes on Windows.
And, since they *don't* want to compete on price with Creative, or Rio, or iRiver or the dozens of other vendors selling digital media devices, all of which are significantly cheaper than the pods, they make sure the iPod ecosystem is a closed, Apple-only pod.

So, the iPod becomes a roach-motel kinda product (in a nice way ;-) ); customers buy iPod and they become by default iTunes customers. Conversely, iTunes customers can *only* use their AAC downloads on iPods, so they will likely go out and buy a pod.

Simple, straighforward reinforcing cycle.
And, if you carefully notice; AAC files are mostly useless to non pod-people, as the Pepsi giveaway proved; just as WMA files are mostly useless to the pod brethren.

But, to the proper market the useless becomes useful.
Its the same as the desktop software market.
Mac software is useless to PC users and Jobs want it this way cause he doen't have to compete will Dell and match their features and pricing on a feature for feature, dollar for dollar basis.

Same for iTunes and Wal-mart.
To start with, Wal-mart is not looking to make money off the songs.
They are, primarily, looking to drive traffic to their website at the lowest possible cost.
In other words, the Wal-mart online music shop is an old fashioned (how times have changed!) dot-com play; give something away to build brand awareness and traffic.

Now, as to price; the word is that the music companies charge Apple around 50 cents per song that sells for 99 cents. Presumable the more expensive tracks have a higher wholesale price and Apple is probably passing those costs on to consumers.
Wal-mart, on the other hand, doesn't have to.
They obviously don't want to lose money if they can't help it but they look at any losses in the context of what they're "buying" for those losses; the extra traffic and awareness that will lead (they hope) to greater sales of the other products at their web site.
So, for Walmart, success could be losing 10 million on music downloads in a month and making 50 million in extra online sales of jewelry and clothes and electronics and what-not...

And, it is worth noting, that for all of Apple's posturing about selling 70 million songs in a year (which includes the Pepsi giveaway and other promotions) and they more or less break even.

Wal-mart's operation is leaner (and thus likely to cost less to run) and they have a lower penetration being newer and having to compete with Musicmatch, Napster, and the other players. They would probably be thrilled to sell 30-40 million songs over the next year.
At 89 cents per song, they would then be losing about 10 cents per song if their costs are comparable to Apple's. Total loss? About 3-4 million per year.

That's about the price of a couple of 30-second spots on the FRIENDS finale.

In other words, chump change.
But in return, they get millions of people to go to their site, look over their wares, and maybe go and buy a Creative NOMAD or RCA Lyra player to listen to those songs, or maybe they'll buy a new barbecue grill for pickup at the local Wal-mart and discover the convenience of online+plus brick-n-mortar sales...

No real competition here, is there?

What both operations do have in common is a keen awareness of their target customers and the importance of branding.
And the fact that neither is really in the music sales business.
For Apple its all about the Pod; for wal-mart, its the barbecue grill.
Wal-mart core customers are Chevy and Camry buyers; apple's are VW and Audi buyers. Very different profiles. :-)

The real question at this point is what effect, if any, does the wal-mart operation have on the real sellers of online music; Musicmatch, Napster, and Real...

Any ideas?