"After its first full year selling tracks from all four major labels, Amazon's digital music store has become the second-largest a la carte service, according to industry estimates," Billboard reports. "But it's a very distant second to iTunes," Billboard reports. "Major-label sources say that they had hoped the company would have fared better than it did."
I both use and like Amazon's MP3 store. They're the first non-Apple service to get the integration with the iPod ecosystem correct and they do a damn good job of it. That being said, Amazon is almost never my first choice. You can't buy MP3's on remote devices (ie: the iPhone and iPod Touch) and browsing is nowhere near as intuitive as it is in iTunes (although the search feature on Amazon is infinitely better than the garbage Apple cranked into iTunes).
The bottom line is that the music industry was terrified of Apple becoming an online music monopoly so they gave Amazon things they wouldn't even give Apple to keep them at bay. While that may have scored them some "zing" points, it didn't really knock it out of the park from a business perspective and it didn't create the iTunes destroyer they hoped it would.
Amazon will continue to do well, but it's going to take a long time to knock iTunes off that pedestal, particularly in a time when we aren't even talking about iTunes being only the number one online retailer of music, and are now comparing it to the likes of Wal-Mart and others in the brick and mortar world.