• Silicon Alley Insider, Monday, April 7, 2008 11:30 AM

Digital distribution is threatening Amazon's business. The online retailer specializes in the sale of physical media whose distribution is increasingly moving to the Internet. Perhaps most troubling to shareholders: more than half the company's $15 billion in sales last year came from the sale of CDs, DVDs and books, per The New York Times.

Already in music, Amazon is seeing its market share decline as consumers shift to online services like Apple's iTunes. In fact, Apple recently claimed its media store just became the top seller of music nationwide. Amazon, meanwhile, slipped to fourth, tied with big box retailer Target.

However, Amazon isn't completely dependent on physical sales: It does have an MP3 store, movie-download service, even a book-downloading device. But digital growth can't offset the declines in Amazon's physical business, because 1) consumers can easily steal media through P2P file sharing services and 2) those that do pay go to iTunes, as Apple cornered the legal digital distribution market a long time ago.

Read the whole story at Silicon Alley Insider »