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EMusic signs Universal, aims for the mainstream

October 12, 2010 |  6:07 pm

eMusic, MP3, iTunes, subscription music, Napster, Rhapsody, MOG, Rdio The subscription-music struggles that I wrote about last week aren't confined to the digital services selling access to millions of tracks on an online jukebox. The ones selling bundles of CDsor MP3s for a monthly fee have also struggled to catch on with the masses. The last one standing, as far as I can tell, is EMusic, which launched in 1998 -- a year before Shawn Fanning released the original Napster song-swapping software.

But EMusic is in the midst of an overhaul, trying to change itself from a niche service for lovers of indie-label bands to a more broadly focused service for music lovers in general. As part of that transformation, it announced Tuesday that it has a deal with Universal Music Group, the largest of the major record companies, to add content from its labels and artists (e.g. Interscope, Decca and Island DefJam). EMusic now is home to three of the four majors (although new songs from these labels and a handful of the largest indies often aren't available until well after they've been released to other stores); the only holdout is EMI, but new EMusic CEO Adam Klein said in a recent interview that he expects the company to have all of the majors before too long.

At least as significant is the news that EMusic is changing its pricing, moving even further away from the bulk-discount model of yore. The basic subscription will still cost $12 a month. But instead of providing 24 credits and charging no more than one credit per track (with some album bundles offering better deals), the service will switch in November to a variable pricing model ...

... with new songs costing 69 cents to 89 cents, and those more than a year old selling for 49 cents. That's still a discount from other MP3 stores, but the change makes EMusic look like a down-market alternative to iTunes -- a place to look for discounts on older tracks. In other words, the price EMusic paid for expanding its catalog is a reduction in the value that it provides to subscribers.

Still, the new pricing scheme is a logical extension of the changes EMusic made last year when it signed its first major, Sony Music -- a coup that also was accompanied by a reduction in the number of tracks subscribers could download for their monthly fee. The point, then as now, was to broaden the service's appeal.

EMusic Chart, eMusic, MP3, iTunes, subscription music, Napster, Rhapsody, MOG, RdioThe addition of big-name artists from Sony and, later, Warner Music Group hasn't seemed to have changed the nature of EMusic; its users still spend their credits first on buzz-worthy indie bands. Nor has it sent the company's subscriber rolls into the stratosphere. According to Klein, EMusic has grown from about $6 million in revenue in 2003 to about $65 million in revenue now, but its membership has "flattened out a bit." It now serves around 400,000 subscribers, making it considerably smaller than the Rhapsody or new Napster subscription music services.

In a recent interview, Klein said the membership number "doesn't have to be a whole lot larger" for EMusic to reach long-term sustainability ("We're sort of a break-even operation," he said.) But he added that the company will have to focus solely on regular music buyers -- about a fourth of the consuming public -- instead of trying to reel in the masses with the promise of 35 free downloads.

That means doing a much better job building products and services around members' interests, Klein said. It also means developing music lockers, a "proper mobile offering," better product tiers and, eventually, better social-media features. But it has no plans at the moment to offer streams on demand, nor will it open an MP3 store to the general public, Klein said.

Klein is betting that by improving EMusic's features, he can provide a compelling combination of price and experience to music lovers. The trick, though, will be providing enough value to stay ahead of the increasingly compelling mobile offerings from the likes of MOG, Rhapsody, Napster and Rdio. It costs only $8 to $10 a month now to buy access from one of those services to an enormous online library of songs, accessible from computers, smart phones and a growing number of connected devices around the home. Granted, the MP3s that EMusic offers can be played on even more devices and in more places. But for how long?

-- Jon Healey

Healeywrites editorials for The Times' Opinion Manufacturing Division.

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