The giant online retailer Amazon declared an MP3 price war yesterday by slashing the price of many top-selling downloads in an attempt to grab a bigger slice of the legal music download market.
In a move seen by experts as an aggressive attempt to steal custom from its rival itunes, Amazon cut the price of more than 100 tracks - including Lily Allen's The Fear and Lady GaGa's Poker Face - to 29p.
On the bargain list, which spans pop, hip-hop, rock, classical and jazz, music fans can also find older tracks such as Oasis's Wonderwall, the Dambusters March played by the BBC Symphony Orchestra and Neil Young's Rockin' in the Free World for up to 70p less than on Apple's iTunes. Amazon, which also offers albums for as little as £3 said the reductions were being made indefinitely.
The news comes as Apple - which is estimated to control upwards of 70% of the legal downloading market - announced some of its hit tracks would increase in price, while other back catalogue songs would be reduced, as part of the company's introduction of variable pricing.
A spokesman confirmed that songs would now be available at the iTunes store at 59p, 79p and 99p but refused to fuel speculation about an MP3 price war, saying the company did not comment on competitors or future pricing strategy.
Music industry analyst Mark Mulligan, vice-president of Forrester Research, said Amazon's actions were the first serious threat to Apple's dominance of the music download market.
"Until this point Amazon have been something of a sleeping giant, we are now seeing some real grandstanding," he said.
But despite the online retailer's marketing offensive, the Apple crown was unlikely to be toppled any time soon. "If Amazon are going to compete they are going to have to throw everything at iTunes or they just won't make a dent. Even if they are cheaper it will take time to change people's habits and it is still that bit more inconvenient."
He added that the real challenge for digital online services such as Amazon and Apple would be to convert traditional music buyers to digital while finding new ways to bridge the gulf between physical and digital music revenue.
"Companies have to find ways of selling to people who don't want to pay. Variable and aggressive pricing is one weapon in their armoury, but it's only part of the battle. The question is not who can beat iTunes but who can take the industry on from what iTunes have achieved," he said.
Paul Scaife, managing director of the music industry newsletter Record of the Day, said more competition was good news for digital music consumers, and variable pricing was welcomed by labels who have long lobbied for songs to be priced according to fans' perceived value. But he warned: "Music has been pretty devalued already. If they continue to sell at a discount that becomes the de facto price and anything else seems expensive. A single track has got to be worth more than 29p."
Record labels are not the only ones concerned about pricing. Scottish dance artist Calvin Harris, whose single I'm Not Alone is expected to debut in the top five this weekend, posted a shocked comment on Twitter yesterday after discovering the price of his song at Tesco. He twittered: "Good Lord just saw you can get it at Tesco's for 57p! 57p!!! That track took me 2 years! 57p! 2 years! 57p! No wonder music's on it's arse."
How much?
Where should you buy the latest Lily Allen single and album?
Digital downloads
Amazon
The Fear £0.29
It's Not Me It's You £6.49
iTunes
The Fear £0.79
It's Not Me It's You £7.99
Tesco digital
The Fear £0.77
It's Not Me, It's You £7.80
7digital
The Fear 99p
It's Not Me, It's You £7.99
CD
Amazon
The Fear £3.89
It's Not Me It's You £8.98
HMV (Islington branch)
The Fear £1.99
It's Not Me It's You £10.99