M+E Daily

Walmart is planning to shutter its MP3 storefront by the end of August, after more than 7 years of trying to position itself as a contender in the digital music marketplace.

Either the mass merchant decided it had become too costly to fight for any significant share of digital music spending — the dominance of Apple’s iTunes has never been threatened by any rival service since its 2003 debut — or Walmart concluded that digital music does not lure online shoppers into making larger non-entertainment purchases in the same way that CDs did in years past. Both considerations may be at work.

“The sale of physical [recorded] music products on Walmart.com as well as in Walmart U.S. retail stores will remain unaffected,” the retailer told distributors. Meanwhile, Walmart Soundcheck, the retailer’s website for cross-promotions between music acts and consumer brands, “will remain operational as a live streaming site without any download options.” Digital Music News first reported the retailer’s decision.

As with many other products it sells, Walmart’s chief tactic in digital music retail was to tout discounts that consumers wouldn’t find anywhere else. But Walmart peddled marketed music files in the also-ran Windows Media format for nearly five years before switching to DRM-free MP3s.

What’s more, the retailer failed to establish itself as the destination for discounted music. Even though it sells downloads of select hit songs for 64 cents (representing a 50 percent discount from iTunes), Walmart has lost the deep-discounting battle to Amazon.com’s MP3 store, whose 99-cent album promotions have at least some music consumers checking prices on the site before they buy an album on iTunes. Yet Amazon has reportedly paid full wholesale price for its biggest promoted titles (e.g., Lady Gaga’s “Born This Way”), incurring costs that, in the long run, are only justifiable if shoppers stick around to buy more than just the digital doorbuster.

While unit sales of both digital albums and tracks are up in 2011 — consumers purchased 660.8 million digital music units during the first six months of the year, an 11 percent increase from 2010, according to Nielsen SoundScan (via ) — the effects on download sales of new cloud music services from Amazon, Apple, Google, and Spotify remain to be seen. Walmart’s exit may prove well-timed, allowing the retailer to allocate its online resources to more profitable goods and services before the next digital music inflection point forces further consolidation of the marketplace.