Wal-Mart’s 88-Cent Siren Song

The market for ultra-low-ticket song downloads from online music stores continues to heat up. Wal-Mart Stores Inc. has launched a service on its Web-based operation, Walmart.com USA LLC, that offers single songs for 88 cents, or 11 cents cheaper than what has become the 99-cent standard price for songs available from Apple Computer Inc.'s iTunes Music Store service and other music sites. Wal-Mart claims to have hundreds of thousands of songs available for download on its new site in Windows Media Audio format. The new site is meant to test customer reaction, the retailer says, preparatory to launching a full-fledged song-download service in the spring. Currently, the Wal-Mart site accepts only credit and debit cards for song purchases. The sudden popularity of the market for online songs has helped revive interest in micropayments, and various startups are hoping to take advantage of consumer interest in low-ticket content from Web sites to launch their new services for managing payments. Peppercoin Inc., a Waltham, Mass.-based micropayments startup, for example, announced last week it would begin in the first quarter next year handling 99-cent song purchases for Blue Note Records, a unit of EMI Music Publishing. The micropayment processors typically offer either prepaid accounts or a form of transaction aggregation to get around the inefficiencies of credit card transaction fees on such small payments. At 88 cents, the Wal-Mart song downloads would offer the chain even less margin, if any, than competing services may be able to realize. Licensing fees alone are estimated to consume at least 65 cents of each download, with transaction fees running anywhere from a nickel to a quarter, depending on payment method. PayPal, the online payments-processing unit of Web-based auctioneer eBay Inc., last week cut its transaction fees by roughly two-thirds exclusively for music downloads so that a typical 99-cent song would cost the music merchant 11.5 cents. And the micropayment companies offer pricing ranging from 5 to 15 cents per transaction. Nonetheless, the online song market is becoming increasingly crowded. Providers now include not only Apple but also Roxio Inc.'s revived Napster service and MusicNet and RealNetworks Inc.'s Rhapsody site. In addition, Gibson Audio, a unit of Gibson Guitar Corp., and AT&T Wireless Services Inc. have both recently announced plans to introduce online services that will download music to devices other than personal computers. Luring players to this market is the surging buyer interest in online music. Apple said earlier this week that its iTunes service has sold more than 25 million songs since its inception last spring. Sales are now running at a rate of 222,000 a day, or three times the rate in early September, when the service was available only to Apple Macintosh users. In October, Apple made iTunes available on Microsoft Corp.'s Windows platform. At the same time, free song downloads from file-sharing sites such as KaZaA are estimated to be at more than a billion a week.