How both companies approach "Born This Way" says a lot about how the two companies are positioning themselves for the fast-changing media business.
Market-trailing Amazon is using aggressive discounts: A 99-cent one-day sale followed by a $6.99 everyday price, which is still below the album's wholesale cost of around $9.
Apple, meanwhile, is milking the advantage it has in being the dominant player, with customers who are steeped in a music-buying process where one part of the business feeds off the other. Its sleek music players, starting with the first iPod, led people to its iTunes Store, where people became accustomed to buying music. The gadget-software-store model means many users treat iTunes as their default music retailer, while also reinforcing sales of the company's gadgets.
Digital-distribution executives at record companies say Amazon has never put much of a dent in iTunes' market share, which is estimated to hover around 90%. And on Monday, the Lady Gaga album was selling briskly on the Apple site at full price, even as Amazon was offering it for 99 cents. Yet some say the Gaga promotion could bolster Amazon, at least temporarily.
Amazon's discounts appear to have succeeded in attracting some price-sensitive consumers. Like Apple, Amazon offers an expanded edition of the album, with 22 songs instead of the usual 14. Apple sells that version for $15.99; Amazon sells it for $12.99. The higher-priced edition has been Apple's top seller for two days. It is No. 4 on Amazon's sales chart, which is led by the cheaper version.
Amazon and Apple declined to comment.
Amazon typically offers a daily album deal for $3 to $5. Monday's 99-cent special generated extensive attention after the company's computer servers slowed down, apparently unable to keep up with demand for the The Lady Gaga album, released by Interscope records, part of Vivendi SA's Universal Music Group, is expected to be among the year's best sellers. The two online stores combined sold about 250,000 to 350,000 copies of the album in its first 24 hours, according to early estimates from a person in the music industry. Only a handful of albums this year have sold more than that in an entire week.
Initial estimates of CD sales are likely to become available Wednesday morning. Nielsen SoundScan won't deliver a full first-week tally for another week.
Amazon often forgoes profits as it seeks to acquire customers in many product categories. The retailer has recently emphasized expansion and revenue growth in its conventional retail business. Its first-quarter profits dropped 33% as it spent to build more fulfillment centers, among other things, and the company has predicted lower earnings for the second quarter.
With the Gaga promotion, it aims to attract users of its new Cloud Drive and Cloud Player—services that let users store music on Amazon's computer servers and listen to it from Android smart phones or Internet-connected PCs.
The service launched without agreements in place with major record labels that would have let Amazon offer certain features that might have made it easier to use. Among those features is one known as "scan and match," which lets users avoid the time-consuming process of uploading their music libraries.
Apple, meanwhile, has built a cloud music service of its own and is in the late stages of negotiations with all four major labels that would let it offer such features, according to people familiar with the matter.
Such an offering from Apple, which could be unveiled as early as next month, would be in keeping with its approach so far. That approach has focused on improving the overall quality of the iTunes Store experience: allowing users to share purchased songs across multiple computers, providing a sophisticated recommendation feature based on an analysis of users' current library of music and offering exclusive additional content.
"Apple tries to cultivate a very different experience. In the end, they're taking a more high brow, refined view," said Mike McGuire, an industry analyst for Gartner.
Analysts say that Apple can afford to take the high road and not compete on price because it dominates the music retail industry. While it doesn't break out data about its music sales, Apple reported a 23% increase in sales to $1.63 billion in a category that includes the iTunes Store and third-party iPod accessories in the most recently reported quarter ended March.
"It's their game to lose," said Mr. McGuire.
Amazon launched its digital-music store in 2007. Unlike the iTunes Store at the time, it offered music files without copy protection software known as digital-rights-management, or DRM. That let people put the files on any computer or music device without restrictions. Analysts say this nudged Apple—whose iTunes was launched in 2003—toward dropping DRM protection on its own songs in 2009.
This week's Lady Gaga promotion probably gave Amazon a short-term boost, according to people in the music industry. But the downloading delays frustrated the users that Amazon was trying to woo, prompting hundreds of them to complain.
The online retailer also can't afford to take losses on every album, leaving the question of how it will entice consumers to come back and download the rest of its catalog at higher prices.
Amazon also faces the challenge of overcoming users' tendency to stay loyal to one service—which so often is iTunes.
"Most people are creatures of habit, and Apple locked that in a long time ago," said Danielle Levitas, an analyst at IDC.
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