As we embark on the holidays, some of our top music sellers are offering steep discounts on many of the albums they offer. Apple announced that their list of 2011’s best albums will be on sale for only $7.99 each, including works from Coldplay and Foster the People, among others. Amazon Music has also slashed their prices, offering a “Fuel Your Kindle Fire” sale, selling over 1,000 albums at $5.00 each. Not to be outdone, Google Music has offered the least expensive option of all by offering half of a million albums at $4.99 each and 10 million singles for only $0.49.

It’s not surprising that all three of these companies are trying  to outmatch each other’s discounts in the holiday season, since so much commerce takes place in these few weeks. Companies trying to undercut their competitors in December is hardly a new development. But these price cuts seem especially severe. From these moves, Apple, Google, and Amazon seem to be acknowledging Spotify, a new entrant in the field that’s offering music for free, an amount that none of these three can compete with.

Spotify launched in America in July after enjoying great success in Europe. Spotify offers a large catalog of music that can rival iTunes’. But unlike iTunes, all of Spotify’s music is offered for free, only requiring users to listen to a short commercial every few songs. With a premium subscription, at a price per month cheaper than most iTunes albums, even those commercials can be done away with. It’s the first site to legally offer such a wide selection of music for free on which users can choose exactly which songs to listen to, unlike streaming radio services like Pandora and Grooveshark. Since users can listen to most music for free on Spotify, the need to buy music on iTunes and Amazon and Google’s music outlets has lessened, making heavy discounts imperative.

By offering such deals, these music providers are hoping to convince buyers to purchase individual albums instead of using Spotify to listen to the very same music. It may work; people are still used to buying their albums on iTunes and on other online places, and seeing top albums served up at a discount will certainly be enticing. But even if these sales help business, there’s an unavoidable feeling that Spotify is right around the corner, offering the deepest possible price cut. Spotify might not deter sales from these deals just yet, but as it gains notoriety (the constant bombardment of Facebook friends listening to music on it has made it a household name), its allure will entice people to make the switch. Apple, Amazon, and Google may not want to outwardly acknowledge Spotify’s presence, but it’s undoubtedly lurking.