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iTunes Tries To Steer Labels Away From Amazon’s Daily Deal

Apple’s iTunes store has always dictated the terms of its dealings with record labels. As such, the largest U.S. music retailer has never censured the labels over marketing or promotion strategies.

But that may be changing. The bee in iTunes’ bonnet? Amazon’s MP3 Daily Deal.

When Amazon first launched the Daily Deal in June 2008, its primary aim was to drive more customer traffic to the online retail giant’s MP3 store. “The labels paid nothing for being included in that privilege, nor were they asked,” a major-label head of sales says.

But in mid-2009, the executive says, “that promotion morphed into something where the labels make arrangements to provide an exclusive selling window with Amazon for a big release expected to do a lot of business on street date.”

In exchange for a Daily Deal promotion on a new album, Amazon has been asking labels to provide it with a one-day exclusive before street date and such digital marketing support as a banner ad on an artist’s MySpace page and messages on label and artist Web sites and social network feeds.

“When that happened,” the executive says, “iTunes said, ‘Enough of that shit.’ ”

Sources say that iTunes representatives have been urging labels to rethink their participation in the Amazon promotion and that they have backed up those warnings by withdrawing marketing support for certain releases featured as Daily Deals.

In response, label executives at Capitol, Capitol Nashville and Jive recently opted against participating in Daily Deal promotions they had been considering for Corinne Bailey Rae’s “The Sea,” Lady Antebellum’s “Need You Now” and Ke$ha’s “Animal,” sources say.

An executive at Sony Music Entertainment denied that Jive had ever considered participating in a Daily Deal promotion for “Animal.” Representatives for Apple and EMI declined to comment.

The iTunes pushback against Amazon’s Daily Deal began when Island placed Mariah Carey’s “Memoirs of an Imperfect Angel” in the promotion. Amazon customers could purchase the album for $5.99 a day before its Sept. 29 street date, helping drive first-week U.S. sales of 168,000 units, according to Nielsen SoundScan.

To help labels sidestep iTunes’ objections, Amazon has been fine-tuning its Daily Deal pitch on new titles, agreeing, for instance, to forgo the one-day exclusive window on certain ones. But executives familiar with the situation say iTunes has continued to voice its displeasure with other aspects of the promotion, such as label marketing support.

“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.

Now that iTunes’ objections to the Daily Deal are widely known, most labels are shying away from allowing their new releases to be part of the promotion on either street date or the day before. For example, sources say that when Amazon recently approached Hollywood Records to highlight “Who I Am,” the debut album by Nick Jonas & the Administration, the label declined.

Still, other label executives say the whole situation is fluid. While it may not make sense to participate in a Daily Deal promotion for artists that iTunes would typically promote, it may be sensible to partner with Amazon on a Daily Deal with other releases that may not get the red carpet treatment at iTunes, a major-label head of sales says.

One of the few albums to participate in an early-street-date Daily Deal promotion so far this year is Vampire Weekend’s “Contra,” which Amazon made available for $3.99 Jan. 11, a day before it was available anywhere else. The promotion played an obvious role in powering the album’s No. 1 debut on the Billboard 200, with first-week U.S. sales of 124,000, of which 60% were digital downloads, according to Nielsen SoundScan.

“The whole issue is a kind of interesting dynamic,” a senior major-label distribution executive says. “Amazon is fighting a guerrilla war against iTunes, and now iTunes is getting frustrated because they work hard to set up and promote a release weeks in advance of the street date, and then lo and behold, Amazon jumps in there with this deal of the day and scrapes off some of the cream.”