The price of downloading music legally is getting lower and lower, and for online music stores, it is only going to get tougher for them to generate revenue and keep themselves afloat.

Amazon recently announced an affiliate program offering 20% of the cost of music downloads to affiliates (which will drop to 10%) after January 1, 2008. With tracks from Amazon costing as little as 89 cents to download, industry analysts are starting to wonder how money can be made form such a service.

It was also announced recently that Apple will reduce the price of its DRM-free iTunes Plus songs to 99 cents, suggesting that Apple is already worried about the threat Amazon is posing.

This price battle will continue until there are simply no more prices to be cut and companies actually lose money with each song they sell for users to download. What this will lead to is online music stores having to exploit other methods of making money.

What’s next for digital music?

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