Apple Flexes Its Muscle Over Amazon in the Digital Music Biz

Apple (AAPL) and Amazon (AMZN) are frequent sparring partners, but when it comes to the digital music biz, Amazon is punching above its weight class. Billboard reported this afternoon that pressure from Apple has convinced several major labels to forgo running lucrative promotions with Amazon. Execs in the music biz see this as counter-productive, but for Apple it's just business.

Amazon had been running a special called The Daily Deal since 2008. Originally it was just a way to offer discounts and drive customers to Amazon's MP3 store. The labels didn't ask for the privilege of a guest spot, and they offered nothing in return. But more recently Amazon began getting an exclusive window to premier major label albums expected to sell big their first week on the street. "When that happened," a major-label head of sales says, "iTunes said, 'Enough of that shit.' "

The Daily Deal had been working out well. Vampire Weekend, which premiered through Amazon a day early, debuted at #1 with first-week sales of 124,000, 60% of which were digital downloads. But when Apple began turning the screws, labels like Capitol, Capitol Nashville and Jive decided to skip Daily Deal exclusives on big seller like Lady Antebellum and and Ke$ha. This fits with Apple's current stance as a bully. "They are diverting their energy from let's make this machine better to let's protect what we got," says a major-label executive who has been following the situation. Of course, digital downloads are still growing, and every track Apple keeps out of Amazon's hands is another one in their pocket. Apple has 70% of the digital music biz to Amazon's 8%. With that gap, a little shoving could go a long way.

Image from earinfo.com