Amazon.com spent $3.2 million on last week’s Lady Gaga promotion, with Billboard magazine citing industry sources who said that the online retailer sold 440,000 digital copies of the album at the discounted price. Why did the typically cost-conscious company decide to take a bath on the album?
Call it the Walmart approach to retailing. Just as the Arkansas retailer uses deep discounts to get shoppers in the front door, Amazon took a similar approach with Lady Gaga’s “Born this Way.”
The stampede at Amazon’s front door did cause some problems.
As previously reported, the site stalled as some customers were unable to download the entire album.
Billboard reported that Amazon.com lost $7.40 on every 99 cent album that it sold. (The promotion has since ended, and “Born this Way is now selling for $6.99 on Amazon).
Of course, Amazon — with $3.7 billion in cash on hand — can afford to do this. And the promotion really is more about Apple and Google than anything else, since Amazon.com is locked in a batte with those tech titans over the future of music distribution.
Offering Lady Gaga’s “Born this Way” at 99 cents certainly grabbed some headlines and drove attention to the company’s new Cloud Drive music offering.
Amazon is not opposed to giving away or offering steep discounts on products in order to grab market share, much as Walmart has done over the years.
In fact, Amazon Fresh just started offering free milk for one year to customers who spend $75 on home grocery orders in Seattle.