As prices for basic services drop, digital distribution is becoming a commodity with few differences between services. Artists and labels are being well served by low-priced distribution services that charge a flat fee and return 100% of retail sales. Market entrants, however, will probably find scant profits in striving to be a low-cost leader.

On Monday, ReverbNation announced it has added a second tier for its digital distribution service. The first tier, called the “Essentials” package, costs $34.95 per release and covers iTunes (worldwide), eMusic, Rhapsody and 25 other digital service providers. The $59.95 “Pro” package adds Pandora, Nokia, Lala, We7, Amie Street, Myxer, Wal-Mart (Liquid), ThinkIndie and Shockhound.

ReverbNation’s prices are comparable to the prices charged by TuneCore for digital distribution of an album to 19 stores ($46.99 and $59.58 for different types of service). TuneCore also offers a tier for single tracks – an angle ReverbNation has thus far ignored – that cost $9.99 for distribution to all digital service providers. ReverbNation launched its digital distribution service in October 2008.

More low-priced options are out there. Last week, French digital distributor Zimbalam launched in the U.S. and Canada with a $30 flat-rate service. In the UK, Ditto Music calls itself cheapest distributor. The company touts a 110% payout that includes 100% of sales plus 10% for performance royalties.

Other distributors are already taking a different position by offering value-added services to stand out from their competitors. The Orchard, IODA and some others have purposefully shifted away from price competition and toward being full-service digital marketing companies. Lifestyle marketing and sync licenses, for example, are two aspects to digital distribution that can help a company differentiate itself without entering a price war.

Even so, expect to see more price competition in digital distribution. That will put pressure on companies to find revenue elsewhere. Just as mass merchants have long used CDs as a loss leader, service companies will use digital distribution as a way to lure customers to other products.

Questions? Comments? Let us know: @billboardbiz

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