By Philip Elmer-DeWitt
August 10, 2011

One of Apple’s most serious challenges in the digital music market is giving up

“After eight years in business, the Walmart Music Downloads Store located at mp3.walmart.com will close on August 28, 2011. All content in the Store will be disabled and no longer available for download from the store.”

So begins the certified letter sent to Walmart’s (WMT) distribution and licensing partners and posted Tuesday by Digital Music News. The death of the service that was hailed as an “iTunes killer”¬†when it launched leaves few challengers to Apple’s (AAPL) domination of the digital music market. In the U.S., Amazon (AMZN) runs a distant second. Spotify has a strong following in Europe, but its efforts to get a foothold in the U.S. have been repeatedly delayed.

Walmart’s strategy had been to undercut Apple with cheaper downloads. But as Digital Music News notes, a dime’s savings here or there was not enough.

“It looks like price isn’t the most important thing when it comes to music downloads. Once upon a time, Walmart was an ‘iTunes-killer’ with deeply-discounted, 88-cent MP3s. But discounts meant little compared to integrated iPod and iPhone integration, a superior iTunes user interface, and the tether created by stored credit cards (which Apple does well).”

Although its letter to distributors warned that all content on the store would be disabled by the end of the month, a company representative told Digital Music News that older, copy-protected songs will continue to be supported — at least for now.

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