Going Gaga For a 99-Cent Download

Born This Way debuted at no.1 on the Billboard charts with more than 1.1 million copies sold in the first week–the best performance of an album since 50 Cent’s The Massacre back in March 2005. It was Gaga’s first no.1 album, and she is now in the company of only five women that have beat the one-million units mark (Britney Spears still holds the record, for Oops, I Did It Again, which was released in 2,000 and sold 1.3 million).  Despite the fact that we’ve seen Lady Gaga’s albums do well within their first week, such as The Fame peaking at no.2, Amazon contributed to Gaga’s success by selling the album for a mere 99 cents in its first week.

How could this be?  Amazon lost money on each 99-cent sale because they had to pay Gaga’s Distributer Interscope/Universal Music Group. The New York Times pointed out that amazon still paid wholesale price  for each digital copy of the album, about $8 to $9 . Perhaps Amazon used the hype behind Gaga’s new release as a means to promote their cloud service, and compete with their largest competitors Google and Apple. Google recently launched its own cloud music storage service called Music Beta, while Apple recently launched the “iCloud.” Amazon sold 443K units of the  Born This Way record at a  loss of  $3.3 million— a marketing investment justified by an inordinate increase in traffic that overwhelmed its servers and helped increase its market share as a digital merchant in music.

Whether or not this sale helped Interscope/Universal remains in question.  2.1 million units were shipped to big box stores and other locations before the release of Born This Way.  Those retail accounts must have taken some loss—which in turn hurt the major.  This is because it is standard in the business for the majors to have an inventory liability with merchants, allowing them to return a percentage of the product in the event of a lack of sales. Had Universal planned the discount better, it could have avoided the shortfall, which had many brick-and-mortar sellers complaining (for them, like iTunes, the album was priced at $11.99).

Some suggest that this marketing strategy will become a trend and that music is quickly becoming  “the toy in the Happy Meal”. Altering pricing to break an artist into the industry is not new. It was done with singles in the late 1990s to break an artist or help push albums to the no.1 position. When Billboard became aware of such tactics, it suspended the singles chart.

Regardless, Gaga’s label and management claim that they were not aware or involved in Amazon’s promotion. Lady Gaga told Rolling Stone that she applauded Amazon for giving everyone the opportunity to buy music. But, of course, to come out openly and endorse an arrangement that alienated many of her retail accounts would have been disingenuous–particularly because the discount only applied to digital downloads and the ratio of digital to physical sales was, at 700K to 400K, too close for comfort.

by Vanessa-Vivian Martinez

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