Amazon is losing millions on its 99-cent Lady Gaga promotion

By Sean O'Neal | May 26, 2011 | 5:24pm

Aux Features Music

For those who haven’t already dug up the whole thing by finding all the magical unicorns in FarmVille, Amazon is offering a second chance to buy Lady Gaga’s new Born This Way at the low, low price of just 99 cents for the entire album. It’s a risky marketing strategy intended to drive traffic to the site and position Amazon’s music downloads as a viable contender to iTunes, as well as promote its new cloud-based storage services—and in terms of creating awareness, it’s definitely paying off. It’s just not paying off in terms of, you know, money: Billboard estimates that the company will lose as much as $2.96 million today if sales reach their projected figures of 400,000 units sold, because Amazon is still required to pay Interscope/Universal Music Group its standard 70-percent of the base price—in other words, handing over $8.39 for every 99-cent album sold.

Of course, Amazon can take the hit, and it will probably recoup that $2.96 million in sales of last-minute Father’s Day gift cards alone. Still, that’s a lot of money to sacrifice on promotion. Perhaps their loss will be ameliorated somewhat by the knowledge that a lot of Lady Gaga fans have reportedly given up on trying to get the album after experiencing six-hour downloads and crashed servers? (Or perhaps that was part of the plan all along?)