Download service eMusic unveils new pricing model, indie labels jump ship

November 17, 2010

Jacob Ganz

Get them while you can, eMusic subscribers.

When it comes to a record store, what's more important, a comprehensive selection or a carefully curated assortment of options?

It's a question that patrons of the subscription download service eMusic are going to have to confront starting tomorrow. The company has never been able to compete with iTunes or Amazon for a huge share of the digital downloading pie. But it has been well curated and well regarded; a note on the company's website reads: "eMusic recreates the benefits of the corner music store."

Today seemed to mark a shift in eMusic's priorities. The company announced that it would be adding 250,000 tracks to its catalog, but losing the music of major indie labels Domino and Merge, and the labels under the Beggars Group umbrella, which include Matador, XL, Rough Trade and 4AD.

In an email to subscribers, eMusic wrote:

As we prepare for the largest catalog addition ever to eMusic -- 250,000 new tracks! -- we want to be up front with our loyal indie fans and provide advance notice that music from Domino, Merge and the Beggars Group family of labels will no longer be available on eMusic as of Nov. 18, 2010 pending further discussion.

This is as heartbreaking to us as it is to you. Please know we have done everything we could to keep them from leaving. Forging deals with our label partners can be pretty complex. As many of you know, labels have come and gone over the years, and we hope to see these labels back soon.

That means albums like Vampire Weekend's Contra, Arcade Fire's The Suburbs and Dirty Projectors' Bitte Orca won't be available to eMusic subscribers.

Tomorrow, users will get another surprise: The company will also unveil a new variable pricing model.

In the past couple of years, along with an effort to increase the size of its catalog, eMusic has also raised the price of a download. When it launched, a $10 subscription bought unlimited songs. But that didn't entice labels. And without a broad catalog, users didn't sign up. Over time, eMusic has adjusted pricing as it has added labels; major labels Sony and Warner are recent additions. The majority of this week's additions to the site's catalog come from a deal with Universal.

Unlike iTunes or Amazon mp3, where each song or album to be downloaded has a price in dollars, eMusic has traditionally charged subscribers a flat fee that gives them access to a certain number of downloads each month (subscriptions currently start at $11.99 for 24 songs). At about 50 cents per song, that model benefits subscribers who use all of their credit, but unused credits were lost at the end of each month.

For the labels supplying the music, the theoretical benefit of site's low prices depends on volume. Though royalties for each sale will be lower, if enough customers are attracted by the promise of a good deal, total sales will increase.

The new eMusic model changes things a bit. Subscribers will still pay a monthly fee, but they'll no longer get a specific number of songs. Instead, tacks will sell for a range of prices between $0.49 and $0.89. Songs will still sell for lower prices than on iTunes, and the incentive for members to use all of their credit will remain, but prices for some songs will sneak upwards. Now, if your plan costs $11.99, you'll still be able to download 24 songs from most tracks in eMusic's catalog, but if you're after those higher priced tunes, your $11.99 will only buy you 13 songs.

So what is it about these moves that could prompt some of the biggest indie labels to sever their relationship with the service?

In a post on eMusic's blog, Adam Klein, the service's CEO, wrote, "In the process of expanding our catalog and making the changes necessary to serve our members and ensure the long-term sustainability of our business, a few labels have chosen to exclude themselves from the new comprehensive eMusic offering. We will greatly miss their artists and their music and trust that they will find their way back to our members soon."

Public responses posted on the Beggars Group and Merge websites didn't offer much in the way of explanation.

From Merge:

Unfortunately, eMusic’s unilateral changes in effort to bring on the major labels has created a situation where it would be harmful to the interests of Merge and our artists to continue our partnership at this time.

From Beggars Group:

We wish this hadn’t happened, but as eMusic has brought major labels on board, they have changed the terms on which they deal with labels in certain ways, some of which we have found impossible to accept, in our own interests, those of our artists, and ultimately those of their fans.

We have loved eMusic, and the support it has given to our music, but it was the dedicated home for independent music and is, in our view, not that any more.

What were these "terms?"

Simon Wheeler, the UK-based director of strategy for Beggars Group, said that the new pricing model by itself wasn't the problem.

"It's not that we don't like tiered pricing," Wheeler said in an email. "We do that with many services ... it was how eMusic wanted to impose the tiers onto our catalogue that was the issue."

He demurred from discussing his specific concerns with the changes eMusic had made. But Wheeler made it clear that as eMusic brought major labels into the fold, it hurt his bottom line.

"They have been an important partner for us," he wrote, "but since adding the Sony and Warner catalogues it has affected our revenues, [and] with the addition of Universal's catalogue we expect the revenues to decline again."

The decision to split with eMusic was a product of that anticipation.

"We will lose some income, but we accept that, as a price ... less painful [than] what we see the outcome of accepting the new terms would be." Copyright 2010 National Public Radio.