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Thursday, December 16, 2010, 09:50 pm PT (12:50 am ET)

NPD: Apple's iTunes Music Store climbs to 66% of digital music market

According to new data from NPD, the iTunes Music Store gained three percent year over year, giving Apple 66 percent of the digital music market, while Amazon's strategy of daily bargains, where it sells albums for a loss, resulted in just a 2 percent gain to 13 percent.

The NPD data, as reported by The Wall Street Journal shows Apple continuing to pull away from Amazon, which tied Walmart for second place for all music sold in the U.S. earlier this year. Apple's share of the digital-download market from from 63.2 percent to 66.2 percent. Amazon's share climbed from 11 percent to 13.3 percent.

Record label distribution executives say the situation could be even worse for Amazon than reported. According to them, Amazon maintains just 6 to 10 percent of the market in any given week, while Apple hovers at closer to 90 percent.

Though Amazon's "daily deals," where it sells albums for as low as $3.99, have seen modest success, the online retail giant reportedly takes a loss on each "deal" sold. People familiar with the matter told the Journal that Amazon often still pays the full wholesale price, usually $7 to $8, for its daily bargains.

Pete Baltaxe, director of Amazon's digital music store, defended the daily deal as "a great way to get people excited about trying Amazon." "If you look across the board, we have been very competitive on price," said Baltaxe.

Amazon has tried the stategy of selling content at a loss before, specifically for the Kindle eReader. Earlier this year, reports emerged that Amazon takes as much as a $4.50 loss on certain e-book titles in order to maintain a dominant position in the market. Apple reportedly argued for higher prices for its iBookstore instead of Amazon's "bargain-basement prices."

NPD's report affirms Apple as the continued leader in music sales. In 2008, Apple surpassed Walmart to take the No. 1 spot among U.S. music retailers. Last year, iTunes represented more than a quarter of all U.S. music sales.