Wal-Mart is adding three outsiders to its sales mix, which it says will add an additional one million items to its inventory, and the company plans to add more in the future. Is this a problem for either Amazon (AMZN), which features some third-party sales, or eBay (EBAY), which offers nothing but?

Maybe one day, but not in the near future. That’s primarily because Wal-Mart is so far behind the big guys. The $1.7 billion Wal-Mart did in Web sales last year makes it the 13th biggest online store in the U.S. Chart via JP Morgan’s Imran Khan:

And even if Wal-Mart’s new partners do boost sales significantly, the ecommerce market is likely to grow even faster. Bernstein analyst Jeffrey Lindsay expects U.S. online retail to grow by $13 billion in 2010 and another $19 billion in 2011. So don’t expect to see Wal-Mart’s Web foes wiping their brows just yet.

[Image credit: PinkMoose]

But it will come at a price: The device, shown below (click on image to enlarge), will retail in December for $399. That’s $100 more than the current price of Amazon’s Kindle 2. And that price point is almost certain to drop in coming months.

Sony wouldn’t let reporters handle the Daily, and didn’t put it through its paces, either. So hard to get a sense of much here. But here’s a video I shot of Sony exec Steve Haber holding the machine while talking up its virtues — which include free access to books from your public library.

EXTRA, EXTRA: SONY’S DAILY EDITION ROUNDS OUT NEW LINE OF DIGITAL READERS

Wireless 3G Reader Extends Sony’s Commitment to Bring
Open Digital Reading to Mass Audience

NEW YORK, August 25, 2009 Delivering on its promise to give consumers a variety of choices, Sony today announced the third member of its new Reader family–the Reader Daily Edition™, a highly-anticipated wireless model with 3G connectivity. The Daily Edition caps its new line of Reader products, joining the Reader Pocket Edition™ and the Reader Touch Edition™ which were announced earlier this month.
The Reader Pocket Edition and the Reader Touch Edition are available immediately, and the Reader Daily Edition will be available this December in time for the holidays at SonyStyle stores and SonyStyle.com.
“We firmly believe consumers should have choice in every aspect of their digital reading experience,” said Steve Haber, president of Sony’s Digital Reading Business Division. “Today, we take another large stride to deliver on that promise. We now have the most affordable devices on the market, the greatest access to free and affordable eBooks through The eBook Store from Sony and our affiliated ecosystem, and now round out our Reader offering with a wireless device that lets consumer purchase and download content on the go.”
A Family of Three Readers
The Reader Pocket Edition sports a five-inch electronic paper display packaged in a stylish chassis and is available in a variety of colors, including navy blue, rose and silver. It is available for the ground-breaking price of $199, making it the most affordable dedicated reading device on the market.
The Reader Touch Edition features a responsive, menu-driven six-inch touch screen panel that enables quick, intuitive navigation, page turning, highlighting and note taking with the swipe of a finger or by using the included stylus pen. It comes in red, black or silver and retails for about $299.
The Reader Daily Edition gives consumers wireless access via AT&T’s 3G mobile broadband network to Sony’s eBook store from just about anywhere in the U.S. Book lovers will be able to browse, purchase and download books as well as select newspapers and magazines when and where they want. There are no monthly fees or transaction charges for the basic wireless connectivity and users still have the option to side load personal documents or content from other compatible sites via USB.
The seven-inch wide, touch screen display provides for intuitive navigation and comfortable layout of content, including newspapers and magazines, whether you’re reading in portrait or landscape orientation. In portrait mode, about 30-35 lines of text are visible, making the experience very similar to that of a printed paperback book. A high contrast ratio with 16 levels of grayscale ensures that text and images are crisp and easy to read. The Daily Edition also boasts an attractive aluminum body with an integrated cover for durability. It has enough internal memory to hold more than one thousand standard eBooks and expansion slots for memory cards to hold even more. It will sell for about $399.
All three models feature Sony’s award-winning industrial design and an E Ink® Vizplex™ electronic paper display that emulates the look of ink on paper. Sony’s eBook Library software 3.0, which now includes support for many Apple® Macintosh® computers as well as PCs, makes it easy to transfer and read any Adobe® PDF (with reflow capability), EPUB, Microsoft® Word®, BBeB® files, or other text file formats on the Reader.
Access to Even More Content at the eBook Store by Sony
In addition to announcing a new family of Readers, Sony has also made several changes and improvements to its eBook Store to provide better access to an even greater variety of ebooks. Earlier this summer Sony announced the availability of more than one million free public domain books from Google, and the company made new releases and New York Times bestseller titles available for $9.99.
Today also marks the launch of Sony’s Library Finder application. Sony, working with OverDrive (www.overdrive.com), the leading global digital distributor of eBooks and to libraries, will now offer visitors to the eBook Store by Sony easy access to their local library’s collection of eBooks. Thousands of libraries in the OverDrive network offer eBooks optimized for the Sony Reader, and visitors can now find these libraries by typing their zip code into the Library Finder. Through the selected library’s download website, visitors can check out eBooks with a valid library card, download them to a PC and transfer to their Reader. At the end of the library’s lending period, eBooks simply expire, so there are never any late fees.
The Reader Pocket and Touch Editions, as well as available accessories such as AC adaptors, cases and covers with reading lights, are available now at SonyStyle.com and SonyStyle stores. Book lovers interested in trying out a Reader in person will also be able to find them for sale at Best Buy, BJs, Borders, Sam’s Club, Staples, Target, Toys“R”Us, Wal-Mart and other authorized retailers nationwide.

DIGITAL READING ECOSYSTEM EXPANDS FOR SONY’S READER

NEW YORK, August 25, 2009 Further evidence of the broad support for its open approach to digital reading, Sony today announced relationships with a variety of traditional and digital publishers who provide content in industry standard formats to create a universe of reading material compatible with the Reader.
All of these sites will offer content in the EPUB format, the International Digital Publishing Forum’s (IDPF) XML-based standard format for reflowable digital books and publications. EPUB has gained acceptance among major trade book publishers with dozens of publishers already producing the majority of their eBooks using the standard. Sony recently announced that the company is transitioning its entire content library to the EPUB format, giving consumers the freedom to purchase or download free eBooks from the eBook Store by Sony and read them on any EPUB-compatible device.
“From the beginning, we have said that an open format means more choice for consumers,” said Steve Haber, president of Sony’s Digital Reading Business Division. “Now, working with other industry leaders, we can provide a device that is compatible with the widest selection of content available. Readers can shop around for what interests them rather than be locked into one store.”
Sony’s eBook Store already provides access to more than one million public domain Google Books in EPUB format and, starting today, Sony’s Library Finder application will go live. Library Finder offers visitors to the eBook Store by Sony easy access to their local library’s collection of eBooks. Thousands of libraries offer eBooks optimized for the Sony Reader, and visitors can now find these libraries by typing their zip code into the Library Finder. Through the selected library’s download website, visitors can check out eBooks with a valid library card, download them to a PC and transfer to their Reader.
Other sites offering EPUB content include:
• Independent Bookstores–More than 200 participating members of the American Booksellers Association–including stores such as Tattered Cover (Denver, CO) and Vroman’s Bookstore (Pasadena, CA)–will have the ability to sell e-content to consumers beginning this fall. The stores using ABA’s IndieCommerce platform will offer content in the EPUB format and protected by Adobe’s Content Server 4 (ACS4) digital rights management, which is compatible with Sony e-Reader products. In addition, plans are underway to make Sony’s e-Reader devices available for purchase from independent bookstores in time for this holiday season. ABA is a not-for-profit trade organization devoted to meeting the needs of its core members–independently owned bookstores with storefront locations–through education, information dissemination, business products and services, and advocacy.
·        BooksOnBoard–BooksOnBoard, the largest independent eBook bookseller and member of both the ABA and IDPF, has been a staunch supporter of the EPUB standard through its founder Bob Livolsi. BooksOnBoard was the first eBook site to offer the EPUB standard to its burgeoning customer base and has sold more EPUB formatted books than any other online bookstore. BooksOnBoard believes that the EPUB standard significantly benefits the publisher, authors and most importantly the consumer.
·        NetGalley–NetGalley is an innovative and easy-to-use online service and connection point for book publishers, reviewers, media, librarians, booksellers, bloggers and educators. NetGalley delivers digital galleys and promotional materials to professional readers and helps promote new and upcoming titles. Starting today, NetGalley will support the Reader with the ability to download a protected PDF file and this fall the company will offer digital galleys in EPUB format.
• Powell’s Books and Powells.com–Powell’s Books is the largest independent bookseller in the world.  Innovative since its inception in 1971, it was one of the first booksellers online (beginning in 1994), and one of the first to sell eBooks for reading devices (the Rocket eBook) in 1999. Powell’s offers EPUB content for a wide range of compatible devices, including the Sony line.  Powell’s is an important player in the open access world of eBooks, where titles are provided by a wide range of publishers in a competitive retail environment, read on a range of devices, and downloaded and owned by millions of people around the world.

That’s still a million miles away from Apple’s (AAPL) commanding grip on the digital music market–it has held steady at around the 70 percent mark for years–but it’s better than nothing. And given that it was at zero less than two years ago, not terrible.

The eight percent number sounded familiar to me because that’s the number the music industry has been guesstimating for some time. But NPD’s stats suggest that Amazon (AMZN) has been grabbing share from smaller players. Not included on the list below, for instance, are NPD data showing that Wal-Mart’s (WMT) download store saw its share drop from 1.9 to 1.3 percent. Also of mild interest: Share gains for the RealNetworks (RNWK) Rhapsody Store and, yes, Microsoft’s (MSFT) Zune Marketplace.

Here’s the breakdown (click on chart to enlarge).

But let’s be clear: The digital music download market looks like the search market in that it’s dominated by a single giant player. But it’s not like search in that there aren’t many benefits to running a download store with a relatively small audience: The small margins for music sales mean that you need to be awfully big to make this a significant business. Which is another reason to be wary of would-be music players that point to their plans to sell downloads (think Imeem, and iLike).

[CORRECTION: My assertion about NPD's unit sales data below is incorrect: The tracking service counts 12 digital download singles as the equivalent of one CD. That makes Apple's share of the market that much more impressive, since singles make up the majority of iTunes sales.]

Ready to toss dirt on the old, unloved CD? You’re going to have to wait a while. Compact discs are increasingly hard to find (at least in physical stores), but someone out there keeps buying them: The ancient format still makes up the majority of music sales in the U.S.

Here are the data for the first half of the year, via the NPD Group consumer-tracking outfit: CDs made up 65 percent of the music market, while paid digital downloads accounted for 35 percent. The digital share has increased from 20 percent two years ago, and Apple’s iTunes (AAPL) alone makes up 25 percent of overall sales*, so you’re going to hear lots of proclamations about Steve Jobs’s ascent to the to top of the music industry.

But hold off on that, just a bit. Because those numbers are skewed even more in favor of the CD than they appear at first glance: They’re measuring unit sales, not dollars. And given that the majority of digital sales are in the single format (i.e., a dollar or so a pop), that means CDs (at $10 or so a pop) still account for the vast majority of music revenue.

Which is why the industry is still tied to CDs, even though no one you know buys them anymore. And it explains why the industry is working on two separate digital formats (dubbed “Cocktail” when sold by Apple, and CMX when sold by anyone else) designed to induce buyers to pay for CD-like bundles.

It won’t work. At best, they’ll convince some digital album buyers to upgrade, but the music business is once again a singles business, and it’s going to remain that way. But you can’t blame the industry for trying.

By the way, there are decent odds you’ll hear about Cocktail at Apple’s September event, which Digital Daily’s John Paczkowski says is scheduled for Sept. 9. Mark your calendar.

*If you’re keeping track: Wal-Mart (WMT) and Target (TGT) trail Apple in the overall market. And iTunes still dominates the digital download market with a 69 percent share, while Amazon (AMZN) is a distant second with eight percent.

At first blush, the AP’s description of the program, found in this press release and this FAQ, sounds a lot like an attempt to implement digital rights management–a lock-and-key system–for the news. But at least in this iteration, that’s not the case. The AP is really talking about adding a layer of metadata to its copy, so it can see who’s using it, and where.

“Any time you talk about a tracking system, the thrust of [the commentary] is about enforcing copyright,” Jim Kennedy, the AP’s VP of strategic planning, told me this afternoon. “But what we hope is the outcome out of this is the ability to enable more licensed uses of  content. We want to keep the content open, we don’t want to keep it behind firewalls.”

If you want to see a benign description of the technology the AP intends to use, head to this site, developed by its U.K.-based partner Media Standards Trust. If you don’t have time for that, just imagine Wal-Mart (WMT) adding RFID chips to track its pallets as they move around the country.

Jim Kennedy tells me that the AP will have tests for the new system up and running by mid-November, and hopes to have it in place for all the copy it produces by the end of the year. And in 2010, it will make it available to the cooperative’s members, i.e., other news organizations.

You’ll hear griping about this from some corners, but all of it sounds fine to me–I don’t care how the AP tracks its product. But note that this tracking system only works when its used by someone who already has a business relationship with the AP.

Which means it doesn’t solve the two problems the AP started complaining about this spring: The  fact that bloggers and other nogoodniks are using AP copy without paying for it and the fact that Google (GOOG) isn’t paying the AP enough for the copy it does use.

On those fronts, the AP’s contract with Google expires at the end of this year, and my understanding is that renewal negotiations are moving slowly, at best. And the AP will continue to use Attributor’s tracking service to find unauthorized uses of its stuff on the Web.

And if the AP ever does try to shove its copy behind a firewall, then a tracking system would come in handy. But we’re not there yet.

If you want a nice snapshot of the way corporate culture and legalese can make even the simplest things mind-bogglingly complicated, head to Wal-Mart’s (WMT) Twitter page. Now click on the “terms of use” link.

That long, long, long slug of text? That’s 3,692 words, and 23,105 characters–the equivalent of 160 Tweets.

Thanks to Microsoft (MSFT) social media guru Danah Boyd for pointing this one out.

[Image credit: sunlight foundation]

But game sales have been weak in 2009, even as movie theaters set box office records. What gives?

I’ll let someone else try to explain the movie side of the ledger (although those box office numbers aren’t always what they seem to be). But it turns out that there’s a simple explanation for game slump: It’s that gamers are huddled in their basements playing Grand Theft Auto over and over and over.

Gamers are indeed spending more time playing videogames, say new data from Nielsen. It’s just that gamers aren’t spending more money on games. Instead, they’re playing the games they have, buying used games, and increasingly turning to game subscription services.

Here’s the argument in chart form–you can get a summary here or download the full report here (PDF). Click on the charts to enlarge:

Hours played:

Used games purchased:

Subscription rate:

All of which explains why Best Buy (BBY) and Wal-Mart (WMT) are both getting into the used game business and why Blockbuster (BBI) and GameFly are expanding their game rental business. Now, if you’ll excuse me, I’ve got to get back to my game of Hover Kart.

Why so reserved? Maybe it’s because Sony (SNE) is struggling through yet  another restructuring, so a big party would seem inappropriate. Maybe because Sony views the Walkman’s birthday as a lot of middle-aged people view their birthdays: Markers of bygone eras and missed opportunities. Or else it’s just Apple’s (AAPL) fault. Associated Press:

The manufacturer, which also makes Vaio personal computers and Cyber-shot cameras, hasn’t had a decisive hit like the Walkman for years, and has taken a battering in the portable music player market to Apple Inc.’s iPod.

Sony has sold 385 million Walkman machines worldwide in 30 years as it evolved from playing cassettes to compact disks then minidisks — a smaller version of the CD — and finally digital files. Apple has sold more than 210 million iPod machines worldwide in eight years….

The archival exhibit shows other Sony products that have been discontinued or lost out to competition over the years — the Betamax video cassette recorder, the Trinitron TV, the Aibo dog-shaped robotic pet.

I do remember hearing some Sony folks mutter hopeful words about a new line of Walkmans that came preloaded with music from Sony artists like Beyoncé and were supposedly flying off the shelves at Wal-Mart (WMT). But that was a while ago, come to think of it, and I haven’t heard about it since.

In any case, just because Sony’s being bashful about the Walkman’s history doesn’t make it less interesting. You can learn more about it at Sony’s online archive, which is compelling despite the fact that it’s a stilted corporate hagiography. Start reading at Chapter 17, part 2: “Listening to Stereophonic Sound While Walking.”

But COO (and temporary CEO) Tim Cook’s dismissal of the netbook market will continue to spark speculation that the company is readying something that sits in between a laptop and an iPhone (which is itself a computer, of course). Silicon Alley Insider’s Dan Frommer got more of Cook’s response than I did so I’ll reprint his quote here:

“When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience and not something we would put the Mac brand on. So it’s not a space–as it exists today–that we’re interested in, nor do we believe that customers in the long term would be interested in. That said, we do look at the space and are interested in how customers respond to it. People who want a small computer than does browsing and email might want to buy an iPod touch or iPhone. We play indirect basis. Then of course if we find a way where we can deliver an innovative product that really makes a contribution, then we’ll do that. We have some interesting ideas in this space.”

EARLIER:

Apple (AAPL) just turned in a strong quarter and followed it up with conservative guidance. A fairly typical performance for the company. Now investors will want to know about new product lines, Steve Jobs’s health and other matters. I’ll be covering the call live. Please refresh this page for the most current information. Click here if you want to listen in yourself.

Joining call now. Tim Cook CFO Peter Oppenheimer going over info that’s already in the release.

Mac products: 2.2 million Macs, a three percent decline year-to-year. Tough comparison from last year. But better than the seven percent drop in PC sales overall. “We feel very positive about our Mac performance.” Began and ended quarter with three-to-four weeks of Mac inventory.

iPod: People still buying ‘em! iPod touch selling well, and so are apps. Claims people like the new shuffle player. [Dubious about that]. We own the MP3 player market. [Duh.] Began and ended the quarter with four-to-six weeks of inventory.

iTunes store: 35,000 apps available in store, up from 15,000 a quarter ago. “We are within hours” of one billions app downloaded.

iPhones: Unless I’m missing something, absolutely no new data here. Praising new iPhone 0S 3.0 that’s in the works. Apple delayed the start of revenue recognition of all iPhones sold after the company announced the new OS, which was March 17. Will start up again once OS is released.

Stores: Half our Macs sold to people who had never owned one before. Average revenue per store is down year over year, because the economy is lousy.

Gross margins: Commodity and other component costs lower than expected. Higher-margin sales better are also than expected. Apple also spent less on operating expenses than expected.

Guidance: Forecasting is “challenging” in macroenvironment. Again, noting delay in revenue recognition for iPhones (see above). Excited about new products in pipeline, etc.

Q&A

Outlook for pricing on component supply? Mostly favorable, but some commodities, like NAND, will increase sequentially. Cook does not expect to see the level of reduction seen in calendar Q1. Will it be down? It will be “in a similar range as last quarter.”

Cash flow issues? Not really, for several reasons: 1) Apple made prepayment to…. [sorry, I didn't catch who that was]; 2) accounts payable were down, from holiday quarter to spring quarter, which is standard; 3) at $1.3 billion, tax payments were up “significantly” from last year.

Mac business: Desktops selling well, but average selling price down quite a bit. What’s going on? Sales accelerated in March after Apple announced new product launch. Higher-end Pro products sold to professionals are down a bit, which is related to economy for obvious reasons. Education sales also down a bit, for same reasons. Hoping Federal stimulus funds will help with that.

Back to netbooks–why won’t Apple sell them? Cook is still criticizing netbooks. The ones available today are ”just not a consumer experience and not something we would put the Mac brand on, quite frankly. It’s not a space today that we’re interested in, and it’s not a space we think that customers in the long-term are interested in.” But… a slight hedge with regard to smaller computers, which are, of course, what the iPhone and iPod Touch are. We “have interesting ideas in this space.” Today’s netbooks really shouldn’t even be called computers, really.

App store: What’s the mix between paid and free downloads and the iPod and iTouch mix? Nope. Apple won’t say. Again, Cook notes that we’re just “hours away” from the one billionth download. Cook: One of the keys behind the growth of iPod has been that sales of the iPod touch “more than doubled year-over-year.” The iPod and iPod Touch have reached sales of 37 million units, a big platform for developers. So there’s a virtuous cycle there.

[Sorry, missed two questions here.]

Why is Apple still doing an exclusive with AT&T for the iPhone? And how’s Steve Jobs? AT&T (T) is the best wireless provider in the U.S. “They have done a very good job with iPhone….We’re very happy with the relationship we have and do not intend to change it.” Structurally, we’re using GSM architecture, and Verizon (VZ) uses CDMA, and we wanted a world phone.

And Steve Jobs? Apple CFO Peter Oppenheimer: “We look forward to Steve returning to Apple at the end of June.” [Translation: No news.]

[Yet another question missing here. Apologies.]

Any info on DRM-free/”iTunes plus” sales? Too early to tell.

How much impact did Wal-Mart (WMT) have on Apple sales? Very key partner for the iPod. The company believes Wal-Mart provides extended reach. Pleased with results, but “early going, and not much to report there yet.”

So many iPhone Apps. How can you make them easier to find on iTunes? (Same problem as music.) Any kind of unusual patterns? Nonanswer here.

Please talk about competition for smartphones–i.e., please discuss the Palm (PALM) Pre. “Difficult to comment on products that aren’t shipping. So there’s nothing intelligent I could say on the Pre.” But “we think we’re years ahead.” We see things through software lens and that has benefited us and customers very well. Power of device and ecosystem enormous and we’re now just scratching the surface.”

What about suing Palm re: patents on the Pre, etc.? “We think that Apple’s innovation is leading the industry by years. We think competition is great; we think it makes all of us better as long as other companies invent their own stuff.”

But just in case you weren’t convinced, here’s some new data from NPD Group:

• CD sales dropped by 19 percent last year.
• The number of U.S. CD buyers  dropped by 17 million last year.
• The number of music buyers dropped by 13 million last year.

Only the last number is noteworthy. Because while NPD says that digital music downloads increased by 29 percent in the last year–good for Apple (APPL)–the research firm also notes that many Americans have simply stopped paying for recorded music, period.

Up until last fall, music optimists would argue that this was OK, because people were more engaged with music than ever. Semi-true cliche: The music labels are in trouble. The music business is doing just fine.

And indeed, NPD throws out a series of stats which show that more people are listening to free music provided by the likes of Pandora, iMeem and News Corp.’s (NWS) MySpace Music. But all of the sites that are providing free music are having a very hard time figuring out how to make a business out of it. It’s quite likely that we’ll see some of them fold or sell out in the next few months. Stay tuned.

Note: News Corp. owns Dow Jones, which owns this site.

The six-unit Virgin Megastore chain will close two more stores, the Union Square location in New York City at the end of May and the Market St. store in San Francisco at the end of April, sources say….

In August 2007, the Virgin Entertainment Group North America was acquired by two real estate companies–the Related Cos. and Vornado. Since then, the chain has been reduced from 11 units–with the industry awaiting word of the fate of the three remaining stores in Denver, Los Angeles, and Orlando, Fla.”

At this point the real news should be when people buy music at brick-and-mortar outlets at all. They still do: CD sales continue account for the majority of big music’s revenues.

But as the handful of remaining music stores vanishes, and the big boxes like Wal-Mart (WMT) and Best Buy (BBY) keep cutting back the space they allot to discs, that won’t remain true for long.

And that’s what’s happening right now between publishers and Source Interlink Distribution and Anderson News Co., two distributors that represent about half the industry’s retail sales. Source and Anderson have been demanding an extra seven cents for each magazine they deliver, citing higher costs. Publishers have balked, citing lower revenues.

Now Time Warner’s (TWX) Time Inc., the industry’s biggest player, has upped the ante, telling Source and Anderson that it’s taking its business elsewhere, starting next month. It delivered the news to Source yesterday; today it told Anderson, which handles most of Wal-Mart’s (WMT) magazines. Here’s the statement from spokeswoman Dawn Bridges:

In view of the new structure that both Source Interlink and Anderson are implementing, as of Feb. 1, Time Inc. will not be providing either group with any our our titles. Our intention is to have the business replaced by other wholesalers. We hope to have specific details to share shortly.”

I’m assuming that 1) Time expects its distributors to back down before it makes good on its threat and 2) it does indeed have a backup plan.

But if Source and Anderson do call Time’s bluff, I’d have to assume that the logistics involved in switching distribution partners are considerable, and pretty hard to execute in a couple days. If you’re a fan of titles like Time, Sports Illustrated and People, and you like to buy your copies at stores or newsstands, you might want to make alternate plans for the near future. Like reading them online.

Last June, a Vornado executive told Reuters that the store would shut down in the first quarter of 2009. The decision to close the store appears related to real estate and the value connected to the location. That executive was quoted as saying that Virgin pays only $54 per square-foot when the market rent in the area is about $700 a square foot.

So, while the store, which does an estimated $55 million in annual volume, is profitable to the tune of $6 million, according to sources, the space would be even more profitable for its owner with a higher rent tenant. Vornado bought the 180,000 square foot retail component of the Bertelsmann building, which houses the Times Square store, in 2006, and will lease the space to Century 21, according to reports.

The closure leaves the Virgin chain with five stores, and one of them, the Union Square store in New York, will now be the city’s premiere record store, with an estimated $40 million annual volume. But the status of that store is also at question as the Related Cos. and Vornado leased the ground floor of the store to Nordstrom Rack for the holiday season, only to have the deal fall through.”

I get that the decision appears to be “related to real estate,” but it’s really about the health–or lack thereof–of bricks-and-mortar music retail. If the No. 1 store in the country can’t make it, and if New York City’s “premiere record store” rented out a floor during the peak sales season, then why is anyone bothering to sell CDs in stores, period?

Plenty of retail executives seem to be asking themselves the same question, and are responding by cutting the small space they’ve devoted to CDs even further. The exceptions: Special promotions for exclusive albums, like Wal-Mart’s (WMT) successful push for the new AC/DC album last year, and Best Buy’s (BBY) unsuccessful gambit with Guns N’ Roses.

[Image Credit: Troshy]

Amazon’s data-free claim that it posted its “best ever” holiday season this month has gotten a deservedly skeptical reception. But here’s one vote in favor of Jeff Bezos’s e-commerce giant: A customer satisfaction poll that singles out just Amazon and Netflix for praise.

Forsee Results says that Amazon (AMZN) and Netflix (NFLX) were the clear winners in its annual survey of Web shoppers. And Amazon was the only company in Forsee’s Top 5 that got higher rankings this year than it did in 2007.

Even mighty Apple (AAPL), whose customers were generally fairly happy with their online shopping experience, saw its ranking drop one point over the last year. Here’s a list of results (click to enlarge):

You can spin this stuff any way that you’d like: It’s sort of interesting, for instance, that brick-and-mortar chains like Wal-Mart (WMT), Target (TGT) and Staples (SPLS) improved their scores. And not that surprising that Circuit City (CC), which is in the midst of a Chapter 11 filing, fared poorly. Click here for the full report (ignore the part about this being a U.K. survey). But the real report cards–tallies of what customers actually spent at the stores in the last two months–are just getting finalized now.

One rumor that has yet to materialize, though: A cheap version of the phone priced at $99. Instead, Wal-Mart (WMT) will sell the phones at about the same price that everyone else does–the black 8GB iPhone 3G model will go for $197 and the 16GB black or white model will be at $297.

What will this do for Apple’s (AAPL) iPhone sales? Dan Frommer at Silicon Alley Insider does the math:

If each Wal-Mart store gets an average 200 iPhones as inventory, that’s 500,000 iPhone shipments Apple can recognize this quarter. Even if each store gets an average 100 iPhones, that will nicely pad this quarter’s numbers. (And if for some reason Apple waits until next quarter to recognize the shipments, they’ll help during a seasonally slow March quarter.)”