Jesus of Cool: eMusic is Dead! Long Live eMusic!

Written by Jesus of Cool, Music

Jon Cummings chats up eMusic CEO Danny Stein in this week’s Jesus of Cool, talking about the ramifications of the site’s new deal with Sony — and what may be in store for eMusic customers.

Christmas, for me, traditionally comes on the 28th. Of every month. That’s when I flip open my laptop, check the calendar, and get the rush that comes from remembering that eMusic has automatically refreshed my 100-download “Connoisseur” subscription. Awaiting me on the site is the comfort of knowing there’s plenty of stuff I want – starting with the 134 albums that (as of this writing) constitute my “Save for Later” list – and the excitement of knowing there must be oodles of stuff I don’t even know I want. And because the downloads come so much cheaper from eMusic than they do from Amazon or iTunes … and because I never look closely enough at my credit-card bill to notice that the site has been making my bank account 25 bucks lighter every month … I can grab that Sarabeth Tucek album I’d never heard of until just now, listen to it once or twice before filing it away on my external drive, and still imagine that I’ve gotten something for (practically) nothing.

That convergence of low cost and a sense of discovery – i.e., the willingness to take a chance on something new and unknown because the financial risk is relatively low – traditionally has been a big part of the lure for eMusic’s subscriber base. But that equation has changed over the last couple of weeks, as the site has significantly raised its subscription rates as part of the deal it recently struck with Sony Music Entertainment. The agreement is the first that eMusic has been able to reach with a major-label conglomerate, and on July 1 it resulted in a massive infusion of well-known music to the site’s catalog – just in time for subscribers to join the dogpile on Michael Jackson recordings, which quickly shot toward the top of the site’s download charts.

Those downloads, however, now come at 40 to 48 cents a (king of) pop, depending on the subscription, rather than the 25 to 35 cents they did just a month ago. (In order to soften the blow a bit, eMusic has instituted a new “album pricing” system that enables users to download some – but only some – full albums at rates cheaper than the site’s former track-by-track policy would have allowed.) This shift inspires a certain ambivalence; it’s nice, for example, to think that indie labels and their artists will receive higher royalties now, because what has traditionally been a “steal” for eMusic subscribers has also been something of a steal from those acts.

Still, for me, the pricing change threatens to transform my entire concept of eMusic and the way I use it. Traditionally I have been keen to troll the site for recommendations from other users who like some of the same music I like, and to take chances on artists I end up loving (the Guggenheim Grotto) as well as disliking (sorry, Julie Doiron). I have come to consider eMusic the perfect (that is, perfectly interactive and inexpensive) way to keep my tastes current and expanding, rather than calcifying.

But I’ve gotta say, the idea of paying $4.40 for that aforementioned Sarabeth Tucek album today is a lot less enticing than the $2.75 I paid for it last year. If I’ve got 100 downloads a month (and most eMusic subscribers buy far fewer tracks than I do), how many of them am I going to be willing to burn on artists I’ve never heard of – particularly when I now have the option of using those credits to complete my Springsteen or Leonard Cohen collections?

That’s a question I have not yet answered for myself. But while I’ve been thinking about it – and while I’ve been staring down the fresh 100 credits in my account – I asked eMusic CEO Danny Stein for some answers on the Sony deal and the site’s plans for dealing with malcontents like me who are afraid of having too many choices.

How did the negotiations with Sony proceed to the point of agreement? Was per-track pricing the major sticking point, and what other issues blocked a deal until recently?
We’ve been talking with Sony for a long time, since we bought the company in 2003. eMusic was one of the first sites to sell unencrypted MP3s, and the DRM-free format was an issue for all of the major labels until 2008. The next issue we had to agree on was pricing. The major labels continue to find new ways to grow their businesses, and eMusic has become a sizable retail account. We paid our independent labels more than $35 million in revenue in 2008.

What is the structure of the agreement? What limits has Sony placed on providing content to eMusic?
Our agreement with Sony Music Entertainment covers the entire back catalog from every Sony label. We will receive any Sony label record that is more than 24 months old. It is possible that we will begin selling music released inside the 24-month window from emerging artists that our customers may be interested in.

How does the agreement with Sony fit into eMusic’s original business model? I would guess that your editors & marketers have made choices over the years related to website features that were aimed specifically at pushing less well-known (and therefore harder-to-sell) indie acts; are there adjustments to be made when Michael Jackson and Bruce Springsteen are suddenly available?
Our goal has always been to offer our customers as much music as possible in a universally compatible format, at a great value and within some editorial context. Recognizing that customers wanted a quality user experience, independent labels were the first to be willing to experiment with DRM-free formats and pricing. eMusic’s editorial team has always highlighted the music we thought would appeal to our audience, and presented that music with as much context as possible. This goal doesn’t change with the addition of Sony. In fact, the addition of Sony allows us to use some of the better-known artists to shine a spotlight on the lesser-known artists, and provides an opportunity to explore some of the influences of today’s up-and-coming artists.

Regardless of your long-term plans for the site, over the years eMusic has developed the reputation as the place to find indie music on the web, and I assume that a large number of your subscribers have developed loyalties to the site based on that reputation. Do you sense a need to retain that type of indie-based loyalty, and what efforts are you planning to maintain that focus?
Independent music is an integral part of eMusic, and part of our DNA. We will always promote independent music to our customers over the commercial mainstream top 40 which dominates every other major music service. We’ll use some of the better-known artists to help expose independent artists. You can see those efforts in our new “Six Degrees” editorial feature, where we explore the similarities between six seemingly unconnected records.

How do you expect the infusion of major-label acts to alter eMusic’s charts, its “Dozens” features, and its interactive content (user lists, etc.)? So far, apart from the expected surge in Michael Jackson albums, the best-sellers chart does not seem to have been overrun by major-label content. What is your expectation for the future, in terms of sales of Sony catalog vs. the site’s traditional indie content?
So much of what sells on eMusic, as is the case everywhere, is new releases, so we’ll definitely see new indie releases continue to dominate the chart save for a few exceptions here and there. Editorially, we’re treating Sony as we treat any other label on the site – we’ll heavily feature the parts of their catalog that we think our users will prefer. To us, it makes just as much sense to do a feature on the Stone Roses or the London Suede as it does Sunset Rubdown.

How has your agreement with Sony affected your policies with indie labels and artists, in terms of royalty rates, marketing commitments, etc.? Has the response from key partners at indie labels been positive or negative, and what are their concerns?
The reaction from our independent labels has been very positive. Many labels have been asking us to raise prices for years. All our labels have to pay royalties to support their artists and their own costs, so this was a collaborative effort to build a business together that had long-term viability and still maintained our prices as being roughly 50 percent cheaper than iTunes and Amazon. By adding a greater selection of music to the site, we’ll attract more customers and ultimately expose their artists to a larger audience, which is good for everyone. Independent labels will benefit enormously from a larger, more successful eMusic, with more subscribers buying more music and increasing the royalty pool for everyone.

How did you arrive at your new pricing structure? What comments have you heard from longtime subscribers about it? Do you expect a short-term drop in subscribers who cannot or will not pay the new fees?
We’ve been listening to our customers about pricing, and we appreciate that people have such a strong connection to eMusic and are as passionate about it as we are. The price change is a necessary move for us to get to where we want to be as a business. We haven’t yet seen a rise in subscription cancellations due to the new price plans. This is something we’re monitoring very closely.

How does the influx of Sony content enable you to market the site in new ways, or in new places? Alternatively, is there any expectation that the addition of major-label content will make eMusic LESS appealing to certain markets or constituencies, simply because of its impact on the site’s “hipness” factor?
The addition of music from Sony artists certainly broadens our appeal and makes us a more attractive partner for some of the companies we have marketing agreements with, such as SanDisk, Toshiba and Netflix. And we believe that this broadening will allow us to more aggressively feature lesser-known artists that don’t get a lot of exposure elsewhere.

Having Sony music will not change the eMusic sensibility. We think most of our existing subscribers enjoy a wide variety of music and will appreciate the chance to get this catalogue at lower prices than other stores. We hope they will all stick with us and see what we do with the Sony catalogue and other labels we may be able to offer in the future.

Is there any concern that, with only one major conglomerate on board, eMusic may come to be seen as an online version of the old Columbia or RCA record clubs? In other words, can the site (for marketing purposes) afford for very long to treat the addition of the Sony catalog as an achievement in itself — or does it make it necessary, in the near term, to redouble your efforts to get other majors on board, lest eMusic come to be seen by newcomers as an arm of Sony?
We are in active conversations with the other major labels and hope to offer our customers as much music as possible in the future. Our customers will never have to worry about eMusic becoming an arm of Sony Music Entertainment, as we singularly run eMusic for our members. We hope to one day carry all the music in the world, but to merchandise this music through the eMusic lens. That’s what makes us different.

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