In an effort to attract customers and spur music album sales, Amazon offered Lady Gaga’s latest album for the extremely low price of 99 cents on May 23. It turns out that might not have been such a good idea.
That doesn’t mean that demand for Gaga’s Born This Way, which Amazon normally sells for $6.99, didn’t have enough demand. There was plenty of that and then some - so much so that it crashed servers.
The problem is that Amazon suffered from the age-old business problem of spending way too much and not making nearly enough in return on this investment. The New York Times reports:
Amazon paid Interscope’s distributor, Universal, the full wholesale price for the album — between $8 and $9 — and accepted the difference as a loss, according to several people briefed on the sales arrangement, who were not authorized to speak publicly about the details. Billboard reported that Amazon’s two-day sale yielded about 440,000 digital sales; if correct, that would mean that the retailer lost more than $3 million on the promotion.
Given that Amazon hasn’t commented on the issue publicly yet, it would be easy to assume that this is a major failure for its music sales sector.
However, maybe sales revenue (at least for this particular album) wasn’t the point. Maybe Amazon just wanted to draw more attention to digital album sales and away from competitors (i.e. iTunes). It also looks good for Lady Gaga and her label (maybe the only winners in this mess) because her first week sales were boosted to approximately 1.1 million units sold.
It’s a bold strategy, but certainly a costly one. It’s hard to explain why Amazon thought it could make money off 99-cent album sales even if it sold out of the allotted amount. It’s also difficult to predict whether or not Amazon will try such a promotion again. Lady Gaga is one of the biggest and most bankable artists at the moment, and if her album sales can’t even help out a retailer, who can?
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