5 ms·

Amazon Loses $3.2 million on Two Days of 99 Cent Lady Gaga Sales

31 points by lotusleaf1987 15y ago

lotusleaf1987 15y ago
I bought the album just to get the 20GB Cloud drive space free for a year. Definitely a great deal and I'm sure the product awareness from the promotion was cheaper and more effective than traditional ads.
- there 15y ago
  if anyone else missed out, there are actually 69 cent albums available that will give you the extra 15gb free: http://amzn.to/mt5Ihw http://amzn.to/mt5Ihw
- jackowayed 15y ago
  Me too. And then Google emailed me the very next day with an invite to Music beta. It's way better. Oh well, it was just 99 cents.
tybris 15y ago
Probably a carefully calculated loss and lot cheaper than getting this kind of exposure through advertising.
pan69 15y ago
"Amazon will lose about $7.40, according to Billboard's calculation." Yeah? Where the calculation? I just read this as; "We've made up some number".
- potatolicious 15y ago
  The cut that record labels get from online sales are for the most part standardized. Amazon would presumably have to pay this regardless of actual sale price.
- jeffreyg 15y ago
  > The similar title is selling for $11.99 at iTunes. The retailer typically keeps 30% of the sale price, meaning it owes the label and distributor the remaining 70% -- or $8.39.
  - sorbus 15y ago
    That's what would happen if they did the normal thing. If there is any evidence that they did, the article does not present it. Of course, there's also no evidence that they did something different - but the fact that of the three versions of the album Amazon sells through downloads[1] two are not only cheaper than the $11.99 iTunes has it for but also cost less than what the article claims that they must pay the label suggests that this is the case (or that Amazon is taking a loss on every sale, which seems unlikely). [1] One is just the album, one has a digital booklet, and one has the booklet as well as being a "special edition," whatever that means. [2] One is $5.99, one is $6.99, and the third is $12.99.
    - potatolicious 15y ago
      It's widely rumored (with substantial reason) that Amazon MP3 got cut a much better deal from the record labels than Apple. Keep in mind when Amazon's entry first launched, iTunes was practically the only digital music sales service around. The labels were desperate to avoid Apple gaining a unassailable dominance of the market and were throwing other providers significant deals in exchange for fighting Apple. It seems entirely likely that Amazon's normal "cut" for the labels is lower than Apple's.
deleted 15y ago
[deleted]
jdq 15y ago
They didn't "lose" $3.2 million, they paid $3.2 million to advertise their music and cloud service.
- carbocation 15y ago
  Agreed. Even the linked article's headline is merely flamebait. And, as others noted, this isn't just advertisement -- it's direct user acquisition.
waterlesscloud 15y ago
This move was more than mere advertising, it was direct user acquisition. A certain number of people who would not have otherwise had amazon cloud drive accounts now do, and they have music they want on it. It's a frontrun on itunes cloud as much as anything.
- deleted 15y ago
  [deleted]
jdh 15y ago
Awesome 'found money' for Gaga and her label. Everyone who just wanted the free storage increase, or maybe decided to take the whole album because it was cheaper than a track, sent $8 her way from Amazon. She should have put out a promotion paying people $2 to buy the album through amazon, presuming her cut is greater! I like the symmetry with the recent livingsocial promo ($20 at amazon for $10, where LS just bought the $20 credits at full price), which effectively flowed VC money to amazon to leverage amazon's brand appeal to acquire users to livingsocial. Amazon has now taken that money and given it to Gaga. How do I get on this train?
corin_ 15y ago
Is there any reason to believe that this promotion wasn't a partnership between Amazon and the record company? I'd expect Amazon to bare the majority of the discount, but would be surprised if they hadn't got some of the discount knocked off from the other end, as it was a great promotion for them as well.
- potatolicious 15y ago
  Why would Lady Gaga of all people need to stoop to the level of a $0.99 promotion? She's already a household name, I just don't see the incentive for her, or her record label, to want to participate in a steep-discount form of promotion. That's a lot of money on the table.
  - corin_ 15y ago
    Obviously on their own that would be too high a discount for too little gain. However, if Amazon say "we want to do a huge promotion and sell this for $.99, can you give us a $1.50 discount on all sales we make at this price), Amazon is still paying for the majority of the discount, and the increase in sales might well make up for the smaller amount that the record company lost (replace $1.50 with whatever was negotiated). In marketing like this it's incredibly common for both companies to fund the promotion - I have no experience working with the music industry, but it wouldn't surprise me if Amazon negotiated this with them the same way they would with other companies they sell products for.
jasonmcalacanis 15y ago
So they acquired a half millon customers for, ummm, $6.50 each..... .... and they got a TON of press worth millions. .... and the word of mouth has been staggering. .... and they could do this every week for a year and still not lose as much money as was invested in the CueCate. Move on peoples.... nothing to see here but common sense.
- lotusleaf1987 15y ago
  You're arguing against a strawman, most of the comments here have been positive and the article even says: But is a loss really a loss? The important aspect of this 99-cent promotion is the value of the increased traffic and awareness. It has new products to promote, Cloud Drive and Cloud Player... Even John Gruber has been positive on the promotion: http://daringfireball.net/linked/2011/05/28/gaga-amazon http://daringfireball.net/linked/2011/05/28/gaga-amazon
- daimyoyo 15y ago
  Why are you still bashing the CueCat? Yes, it was ugly, and yes they messed up the marketing, but it created the QR codes we see today. Sometimes, things are before their time and they get mocked unfairly for it. For example, Nikola Tesla demonstrated the first remote controlled device(a boat) in 1898. He was mocked for wasting his time with a toy. So I understand it's fun to have a go at the CueCat, but it was just an idea that was before it's time.
  - potatolicious 15y ago
    What does the CueCat have to do with QR codes? I've worked with phone code-scanning extensively in the past and the technology behind a dedicated 1D barcode scanner vs. a 2D code scanner (particularly working with consumer-level optics like mobile phones) are completely different. A quick glance at Wikipedia shows that the QR spec was laid down long before CueCat even existed, and the initial technology was based on parts tracking in industry, not consumer usage. It should also be pointed out that still nobody uses general-purpose QR codes. As a boarding pass? Sure. As a concert ticket? Sure. But when's the last time someone eagerly whipped out their phone to scan a QR code in a magazine ad?
benzittlau 15y ago
These kind of stats bug me. Because someone buys something at .99 cents does in no way mean they would have bought it for the full price.
- JoeAltmaier 15y ago
  ...but Amazon certainly paid the royalty. So it did cost them the stated amount of money.
programminggeek 15y ago
That is some seriously cheap user acquisition for Cloud Player and Cloud Drive - both great services IMO. Well played Amazon.
wicknicks 15y ago
For a company that deals in billions[0], this is more of an experiment to gear towards the future of media dissemination. [0]: http://www.teleread.com/paul-biba/some-sales-figures-from-amazon-sales-are-up-46/ http://www.teleread.com/paul-biba/some-sales-figures-from-am...
andrewhillman 15y ago
great strategy to get new customers. they will gain more than they supposedly lost... this "loss" will be nothing more than a marketing expense.
NHQ 15y ago
We all lose when lady gaga sells music, or gives it away
dbz 15y ago
How much money did Apple lose?

31 points by lotusleaf1987 15y ago

lotusleaf1987 15y ago

I bought the album just to get the 20GB Cloud drive space free for a year. Definitely a great deal and I'm sure the product awareness from the promotion was cheaper and more effective than traditional ads.

there 15y ago
if anyone else missed out, there are actually 69 cent albums available that will give you the extra 15gb free: http://amzn.to/mt5Ihw http://amzn.to/mt5Ihw
jackowayed 15y ago
Me too. And then Google emailed me the very next day with an invite to Music beta. It's way better. Oh well, it was just 99 cents.

tybris 15y ago

Probably a carefully calculated loss and lot cheaper than getting this kind of exposure through advertising.

pan69 15y ago

"Amazon will lose about $7.40, according to Billboard's calculation." Yeah? Where the calculation? I just read this as; "We've made up some number".

potatolicious 15y ago
The cut that record labels get from online sales are for the most part standardized. Amazon would presumably have to pay this regardless of actual sale price.
jeffreyg 15y ago
> The similar title is selling for $11.99 at iTunes. The retailer typically keeps 30% of the sale price, meaning it owes the label and distributor the remaining 70% -- or $8.39.
- sorbus 15y ago
  That's what would happen if they did the normal thing. If there is any evidence that they did, the article does not present it. Of course, there's also no evidence that they did something different - but the fact that of the three versions of the album Amazon sells through downloads[1] two are not only cheaper than the $11.99 iTunes has it for but also cost less than what the article claims that they must pay the label suggests that this is the case (or that Amazon is taking a loss on every sale, which seems unlikely). [1] One is just the album, one has a digital booklet, and one has the booklet as well as being a "special edition," whatever that means. [2] One is $5.99, one is $6.99, and the third is $12.99.
  - potatolicious 15y ago
    It's widely rumored (with substantial reason) that Amazon MP3 got cut a much better deal from the record labels than Apple. Keep in mind when Amazon's entry first launched, iTunes was practically the only digital music sales service around. The labels were desperate to avoid Apple gaining a unassailable dominance of the market and were throwing other providers significant deals in exchange for fighting Apple. It seems entirely likely that Amazon's normal "cut" for the labels is lower than Apple's.

deleted 15y ago

[deleted]

jdq 15y ago

They didn't "lose" $3.2 million, they paid $3.2 million to advertise their music and cloud service.

carbocation 15y ago
Agreed. Even the linked article's headline is merely flamebait. And, as others noted, this isn't just advertisement -- it's direct user acquisition.

waterlesscloud 15y ago

This move was more than mere advertising, it was direct user acquisition. A certain number of people who would not have otherwise had amazon cloud drive accounts now do, and they have music they want on it. It's a frontrun on itunes cloud as much as anything.

deleted 15y ago
[deleted]

jdh 15y ago

Awesome 'found money' for Gaga and her label. Everyone who just wanted the free storage increase, or maybe decided to take the whole album because it was cheaper than a track, sent $8 her way from Amazon. She should have put out a promotion paying people $2 to buy the album through amazon, presuming her cut is greater! I like the symmetry with the recent livingsocial promo ($20 at amazon for $10, where LS just bought the $20 credits at full price), which effectively flowed VC money to amazon to leverage amazon's brand appeal to acquire users to livingsocial. Amazon has now taken that money and given it to Gaga. How do I get on this train?

corin_ 15y ago

Is there any reason to believe that this promotion wasn't a partnership between Amazon and the record company? I'd expect Amazon to bare the majority of the discount, but would be surprised if they hadn't got some of the discount knocked off from the other end, as it was a great promotion for them as well.

potatolicious 15y ago
Why would Lady Gaga of all people need to stoop to the level of a $0.99 promotion? She's already a household name, I just don't see the incentive for her, or her record label, to want to participate in a steep-discount form of promotion. That's a lot of money on the table.
- corin_ 15y ago
  Obviously on their own that would be too high a discount for too little gain. However, if Amazon say "we want to do a huge promotion and sell this for $.99, can you give us a $1.50 discount on all sales we make at this price), Amazon is still paying for the majority of the discount, and the increase in sales might well make up for the smaller amount that the record company lost (replace $1.50 with whatever was negotiated). In marketing like this it's incredibly common for both companies to fund the promotion - I have no experience working with the music industry, but it wouldn't surprise me if Amazon negotiated this with them the same way they would with other companies they sell products for.

jasonmcalacanis 15y ago

So they acquired a half millon customers for, ummm, $6.50 each..... .... and they got a TON of press worth millions. .... and the word of mouth has been staggering. .... and they could do this every week for a year and still not lose as much money as was invested in the CueCate. Move on peoples.... nothing to see here but common sense.

lotusleaf1987 15y ago
You're arguing against a strawman, most of the comments here have been positive and the article even says: But is a loss really a loss? The important aspect of this 99-cent promotion is the value of the increased traffic and awareness. It has new products to promote, Cloud Drive and Cloud Player... Even John Gruber has been positive on the promotion: http://daringfireball.net/linked/2011/05/28/gaga-amazon http://daringfireball.net/linked/2011/05/28/gaga-amazon
daimyoyo 15y ago
Why are you still bashing the CueCat? Yes, it was ugly, and yes they messed up the marketing, but it created the QR codes we see today. Sometimes, things are before their time and they get mocked unfairly for it. For example, Nikola Tesla demonstrated the first remote controlled device(a boat) in 1898. He was mocked for wasting his time with a toy. So I understand it's fun to have a go at the CueCat, but it was just an idea that was before it's time.
- potatolicious 15y ago
  What does the CueCat have to do with QR codes? I've worked with phone code-scanning extensively in the past and the technology behind a dedicated 1D barcode scanner vs. a 2D code scanner (particularly working with consumer-level optics like mobile phones) are completely different. A quick glance at Wikipedia shows that the QR spec was laid down long before CueCat even existed, and the initial technology was based on parts tracking in industry, not consumer usage. It should also be pointed out that still nobody uses general-purpose QR codes. As a boarding pass? Sure. As a concert ticket? Sure. But when's the last time someone eagerly whipped out their phone to scan a QR code in a magazine ad?

benzittlau 15y ago

These kind of stats bug me. Because someone buys something at .99 cents does in no way mean they would have bought it for the full price.

JoeAltmaier 15y ago
...but Amazon certainly paid the royalty. So it did cost them the stated amount of money.

programminggeek 15y ago

That is some seriously cheap user acquisition for Cloud Player and Cloud Drive - both great services IMO. Well played Amazon.

wicknicks 15y ago

For a company that deals in billions[0], this is more of an experiment to gear towards the future of media dissemination. [0]: http://www.teleread.com/paul-biba/some-sales-figures-from-amazon-sales-are-up-46/ http://www.teleread.com/paul-biba/some-sales-figures-from-am...

andrewhillman 15y ago

great strategy to get new customers. they will gain more than they supposedly lost... this "loss" will be nothing more than a marketing expense.

NHQ 15y ago

We all lose when lady gaga sells music, or gives it away

dbz 15y ago

How much money did Apple lose?