Walmart Shutting Down Music Downloads -- and Why Internet TVs Are the Next Battle with Apple

[ Photo of Walmart in Beijing by Daniel Ng, creative commons license. ]

After nearly eight years in business, Walmart Music Downloads will officially shutdown on Aug. 29.

"We recently notified our music partners that we've made a business decision to no longer offer MP3 digital tracks as of August 29, 2011," Walmart spokesperson Ravi Jariwala told LAUNCH.

The service was once hailed as an "iTunes killer" because it charges just $0.88 for an MP3 rather than $0.99 or more for popular tracks.

On the Walmart music store, Katy Perry’s "Teenage Dream" album runs for $9 compared to the iTunes price of $12.99. Yet iTunes became the largest music retailer in the U.S. in April 2008 despite Walmart’s significantly lower prices.

When Walmart launched its online music store, the Bentonville, Arkansas-based company controlled nearly 14% of worldwide music sales, according to Bloomberg. At the time, Walmart boasted more than 12.7M customers visiting its website, which made it the sixth busiest shopping site online.

By the end of 2010, iTunes owned 66% of the digital music market followed by Amazon’s 13% stake. Walmart’s share was less than 1%.

What Apple has proven time and time again over the past decade is that price is no longer the deciding factor in technology purchases -- convenience, design and ease of use are.

The "Apple premium" of almost 13% extra a track simply isn't enough to get folks to leave the iTunes ecosystem.

An ecosystem where Apple doesn't have a seamless "marketplace to device" offering?

Television.

The "digital environment is rapidly evolving and we wanted to provide digital content that our customers want right now," a Walmart spokesperson said in a statement. "We believe that's Vudu."

As usual, Walmart is making sure that its movie rental service Vudu is a default on the opening screen of every television it sells, and why the Apple television set is a lock.

Can Apple's 25% premium be sustained on expensive TVs (think a $1,000 Apple television vs. $750 Samsung equivalent Internet TV)? Given Apple's crushing success with the MacBook Air, which starts at $999 and competes with $699 Windows machines, why not.

The fact is, on a 30-month purchase, the Apple premium on an iPhone vs. Android phone (say, $100) is only $1 a day. A $300 premium on a six-year TV purchase?

A buck a day.

There you have it folks: we just established that the Apple premium over equivalent products is $2 a day vs. $3.

Reminds us of the difference between Dunkin’ Donuts or McDonald's coffee and Starbucks.