Is the great eMusic pricing experiment over? [UPDATED]

EMusic pioneered the music-by-subscription model nine years ago, and it's been refining it ever since. The latest iteration debuted Monday, when the service announced that it had finally struck a licensing deal with a major record company, Sony Music. Specifically, Sony will be mixing some of its back catalog (releases at least two years old) into eMusic's library of more than 5.5 million tracks. It's looks like an important step forward for eMusic's catalog, which to this point has been dominated by independent labels and acts. But it's yet another move away from the steep discounts and high-volume purchasing that have differentiated the company from the likes of Apple's iTunes Store.

Unlike Napster (the legit version, not the song-swapping network), Rhapsody and the handful of other services that tried to sell access to music for a monthly fee, eMusic has always offered subscribers ownership in the form of DRM-free MP3 downloads. The store updates the industry's old music-club model -- persuading people to buy music every month by offering discounts for bulk purchasing -- in two important ways: It sells music by the track, not the album, and it makes the discounts deeper. Or at least it used to -- as part of the Sony deal, the company has raised its price from $10 a month to $12, and lowered the allotment of tracks from 30 per month to 24. In other words, the price per track jumped from 30 cents to 50 cents. (Worse, it did so before adding Sony's offerings, which will be folded in later this year.)

Compared with iTunes, which sells individual songs for 69 cents to $1.29, eMusic remains a bargain. But it doesn't have iTunes' catalog -- it has a large selection of indie labels and some high-profile independent artists, including Radiohead and Paul McCartney, but few of the top hits. And its new pricing scheme isn't better on a per-track basis than the latest iteration of the major labels' music club, which offers mainly older ("catalog") CDs for $7 each.

In that sense, eMusic doesn't seem like the brave experiment in price elasticity that it used to be. The company offered labels less money per track than conventional music retailers did -- about 33 cents per track instead of 60 to 70 cents, judging by one band's royalties -- but promised to make up the difference by selling more tracks. In other words, it was the kind of lower-margin, higher-volume business that the Web promotes (e.g., Amazon.com). EMusic's value proposition was designed to induce fans to spend more on music over the course of a year than they would have otherwise, which would be a good thing for the industry regardless of the per-track results. But from an individual label's perspective, the question has always been whether eMusic's sales were incremental or cannibalistic -- in other words, whether eMusic was bringing in new customers or just offering discounts to people who would have otherwise purchased the label's CDs.

A few labels have tried to avoid the cannibalization problem by holding back their highest-profile releases from eMusic for several weeks. Some also pressed eMusic to increase its royalty payments by reducing subscribers' monthly track allotment. When the company launched the subscription service in 2000, it offered unlimited downloads for $10 a month -- an offer so aggressive, eMusic had trouble attracting labels and, consequently, customers. After Dimensional Associates bought eMusic in 2003, it wasted little time ending the unlimited-download plan, offering 40 downloads for $10 a month instead. That was good enough to attract more indie labels, which in turn drew more subscribers. Four years later, the offer dropped to 30 downloads for $10 a month. Now it's at 24 for $12.

The new pricing scheme may attract more labels, but the risk is that the service is now too expensive to draw in casual consumers. EMusic has been stuck in the aficionado ghetto -- its appeal has been limited to heavy consumers of music. By the time former Chief Executive David Pakman (a persistent and articulate advocate of the low-margin, high-volume model) left last fall, eMusic had about 400,000 subscribers -- not a whopping total by any means, and only half of what Rhapsody has drawn. The same problem afflicts Rhapsody and Napster, whose subscriber numbers have grown slowly in the last year, if at all. That's why Napster recently went the opposite direction with its pricing, introducing an all-streaming service for $5 a month, or one-third the price of its previous offer. Going from $10 to $12 a month doesn't seem like a sure-fire way to broaden eMusic's base, but there's no question that adding older Sony titles (including works by The Clash, Bruce Springsteen and OutKast) will increase its appeal. After all, the problem for eMusic and other subscription services might not be the price point. It may simply be that music fans don't like to commit to spending any amount on tunes month in and month out.

Update, 12:01 p.m.: An eMusic spokeswoman corrected me on one point, saying the company hiked its prices to $12 for 30 downloads last year. The only change this week was to cut the allotment from 30 to 24 for new subscribers. As reader Troy Martin points out below, existing customers are seeing their prices increase and their allotments cut, too -- their plans will now charge about 40 cents a track. It's not clear what will happen to those on annual subscriptions, which have offered tracks for less than 20 cents a song; the best a new subscriber can do on a long-term deal is 41 cents a track.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

Bada Bing ... Microsoft 'decision engine' aims to take search leaders down a peg

Microsoft's new Bing search engine, unveiled this morning by CEO Steve Ballmer, is being positioned as an alternative to the busy, confusing search engines of today.  This more elegant and intuitive "decision engine," Microsoft says, will help consumers distill useful information on commerce-friendly topics such as shopping, travel, health and local business.

The new engine, which will launch next Wednesday, will vary the way it displays results based on the type of info a consumer is looking for. It might be an Expedia-like list of airplane flights, an Amazonian array of customer reviews and price comparisons for digital cameras, or Yelp-esque view of local restaurants, sortable by factors such as price, parking or atmosphere.

"Bing helps you overcome search overload," says a promotional video on the product's website.  To do that, it presents search results in a more logical, user-friendly format, "instead of spitting them out in order of popularity."

The rather negative tone of words like "spitting" and "overload" seem to suggest that market-leading search engines like Google may be bludgeoning consumers with more data than they need.

Rather than introducing a revolutionary approach to presenting information, Bing appears to stitch together its own versions of the Web's most popular planning and decision tools, potentially saving consumers the trouble of navigating to specialized sites.

Microsoft’s redoubled focus on commerce-related search is likely a reflection of the online advertising market, in which sellers pay more to put their ads in front of consumers who are already shopping.

The company's search tools captured just 8.2% of the market, according to comScore's April 2009 report.  That put the company a distant third behind Google (64.2%) and Yahoo (20.4%).

-- David Sarno

Watermarks, a friendlier DRM?

The Digital Watermarking Alliance, a group that encourages content owners to embed unique identifiers in media as a way to combat piracy and promote new distribution models online, released a study this morning on the prevalence of illegal downloading and the motives behind it. (Download the .pdf here.) Done by market research firm Interpret, it used an online survey to gauge how many U.S. residents were downloading media legally and illegally. Then it did what amounted to a push poll of 996 downloaders (again, both legal and illegal) ages 13 to 49, exploring their behavior in more detail and measuring their reaction to watermarking technology. Not surprisingly, given who was paying for it, the survey found that embedding watermarks (called "digital serial numbers" in the survey) could deter people from sharing content online. In particular, a third of the downloaders said they definitely or probably wouldn't use file-sharing services to obtain content if watermarks were deployed, and half said the same thing about uploading.

I take some of the  findings with a grain of salt, such as the assertion that using watermarks would lead illegal downloaders to buy more content from legitimate sources. Watermarks may very well drive some people away from file sharing, but they won't stop them from going to sites that stream free songs or bootlegged movies. As the survey points out, multiple factors influence how people choose to acquire content. Nevertheless, the study provided a number of intriguing insights, including the following:

Craigslist to remove erotic services section, monitor adult services posts [Updated]

Updated at 10:17 a.m.: This post has been updated to add comments from Craigslist Chief Executive Jim Buckmaster, Illinois Atty. Gen. Lisa Madigan and a Craigslist spokeswoman.

After weeks of pressure from state and local law enforcement officials, Craigslist is announcing today that it will remove its controversial erotic services section permanently. In its place, the classifieds site has created an "adult services" category for which every new listing will be manually approved. Currently most ads on the site are posted without review.

As of today, the erotic services section will no longer accept new ads and will be removed completely in seven days. Posts to the adult services section will cost $10, twice as much as those for erotic services listings. Craigslist had agreed to donate proceeds from the erotic services listings to charity but says that rule will not necessarily apply to the new ads.

Craigslist Chief Executive officer Jim Buckmaster said in an interview that the site had come to the decision after carefully weighing input from law enforcement, users, legitimate online businesses and free speech advocates. 

"It was a balancing act where we’re trying to respond to feedback to constituencies that we felt were important.  When you’re talking about attorneys general who are the top legal authority in their respective states," he said, "That was feedback that we felt was important to take into account."

"We’re optimistic that we’ve struck the right balance," he added.

Illinois Atty. Gen. Lisa Madigan, one of the most active critics of Craigslist's erotic services section, called the new oversight regime "a fundamental and very significant change to how Craigslist works."

Prostitution will not disappear, Madigan said, but with the tougher new measures, "You’re not going to have the volume of it, you’re not going to have the ease of it."

Madigan added that her office and others would continue to monitor the site. 

"We’ll use law enforcement techniques to determine whether those are legitimate adult services as opposed to just a continuation of prostitution, with a different name."

When asked for a precise definition of legal "adult services," Craigslist spokeswoman Susan Best wrote in an e-mail, "The typical definition (i.e. go look in your office yellow pages under escort and massage) sensual massage, escorts etc."

Though both Madigan and Buckmaster agreed that the deal had been struck on a cooperative note, the San Francisco company argues that the case against it had been exaggerated. Craigslist makes the point in a blog post it plans to publish today and which was provided to The Times.

"Unsurprisingly, but completely contrary to some of the sensationalistic journalism we've seen these past few weeks, the record is clear that use of craigslist classifieds is associated with far lower rates of violent
crime than print classifieds," the post says. 

"However, with respect to this new paid category for advertising by legal businesses, we will experiment with some of the methods traditionally employed in paid print classifieds."

Law enforcement officials have often complained about the ease with which prostitutes and their clients can arrange encounters on Craigslist. But officials have stepped up their criticism since the slaying of masseuse Julissa Brisman, whose body was found April 14 in a Boston hotel. Police say the killer found her through a Craigslist ad.

Boston University medical student Philip Markoff, 23, is accused of bludgeoning Brisman with a gun and then shooting her. Rhode Island authorities filed additional charges last week, saying he robbed a stripper at a Warwick, R.I., Holiday Inn two days later. He was arrested the following week as he drove to a local casino with his fiancee.

Markoff has pleaded not guilty.

-- David Sarno

Newsplastic: Electronic ink + flexible screens + wireless

Thanks to Amazon.com's Kindle, the e-book reader has gone from a niche curiosity to a mainstream, oft-cited technology in a little more than a year. But now buzz is snapping and crackling about a second wave of electronic readers coming down the pike to give Amazon a run for its undisclosed monies. 

A post by Ars Technica pointed to the array of media interests rumored or reported to be entering the e-reader field -- from telecom heavies such as Verizon, AT&T and Sprint, to Barnes & Noble, to news companies such Rupert Murdoch's News Corp, Hearst, and the owners of the Detroit Free Press, the last two of which have faced crippling challenges to their print products. Upshot: More than a few big shots are betting that even if electronic readers can't print money, they can still make some.

Remember, too, that e-ink is a relatively new technology, so the future's portable news readers are bound to look a lot spiffier than the Stone Age Kindle and Sony units. Amazon is reportedly developing a larger-screen version of the Kindle, and Plastic Logic is already showing off its next-generation touch-sensitive reader.

But the possibilities really start to hit home when you watch these YouTube videos of laboratory-stage e-reader technology. Note that the following video of Plastic Logic's flexible screen is almost 3 years old. 

This video of a Sony plastic color TV screen is 2 years old:

Also from 2007 is the following demo of a cellular device that contains an actual folding screen:

A few weeks ago, Fujitsu released the first color e-reader too. 

Put the pieces together and you have enough technology to build portable, flexible, touch-screen color reading devices -- just the sort of gadget that the publishing world needs.  Both the Kindle and the iPod have suggested that it takes a new hardware platform to get people to pay for electronic content. You're not just buying the song or the book, it turns out, but the ability to consume it anywhere -- a value proposition that much bulkier computers still can't satisfy.

You've got interest from the distribution companies, and you've got a technology that's starting to become viable.  A digital newspaper is now visible at the end of the tunnel. The problem is, there's also a train coming.

-- David Sarno [follow]

With JobAngels and JobShouts, Twitter helps jobless find work

If you think of Google as the Internet’s memory — the process that can access every image, sound and bit of knowledge that a decade of our online existence has generated and stored — then Twitter is its stream of consciousness.

“Stream” has actually become the standard term for the motley sequence of messages that arrives to you, the Twitter user, from all the people you’ve chosen to “follow”: friends, celebrities, industry luminaries, academics, businesses and so on. Like a stream of consciousness, the “twitstream” contains many kinds of thoughts (as well as a lot of useless half-thoughts) but all of it a reflection of what’s on people’s minds — right now.

“The best way to appreciate your job is to imagine yourself without one,” said a tweet that came down my stream Tuesday morning. (A tweet is one of Twitter’s short messages — limited to 140 characters.)

Like a thought from the digital overmind--Wildean as it appears to be--the tweet arrived just as I was searching the Twitter pool for messages that contained the phrase “got laid off.” There were 50 of them in the past 24 hours alone.

“Guess who got laid off,” wrote a user named deboxi.

“Damn economy,” wrote user josephbenninger, after noting his own termination.

Gothicmodel seemed less distraught in breaking her bad news. “Yayyy for unemployment!” she chirped. “Lol ... just looking on the bright side of things.”

And that’s what Twitter user and human resources consultant Mark Stelzner was trying to do on a recent morning over a bowl of corn flakes. “It was one of these days where, over the course of the week, more and more job losses had been posted,” he told me over the phone from Washington, D.C. Stelzner had amassed a respectable followship on Twitter, about 600 people. “And I thought, ‘Well, what would happen if everyone who followed me helped one person find a job?’”

He shared the thought with his Twitter cohort, and they loved it. Later that day, Stelzner fired up a new Twitter account with just that altruistic mission — he called it JobAngels.

Two weeks later, the nascent enterprise has attracted more than 1,000 followers. Stelzner has shot out hundreds of tweets from people volunteering their résumé-proofing skills, passing along job notices or looking to become full-blown job angels — raising a wing for gig-seekers in need.

Flush with the glow of very early success, Stelzner...

Cash4Gold nabs Ed McMahon, MC Hammer for Super Bowl spot

Please, Cash4Gold, don't hurt 'em.
Photos: Matt Sayles / Associated Press; Jeff Chiu / Associated Press

Cash4Gold.com, the "As Seen On TV" meltdown factory that solicits baggies of your unused chains, rings, coins and earrings in exchange for a bit of quick cash, has kicked a PR field goal. 

The company said today it had signed Ed McMahon and MC Hammer to star in a commercial for Sunday's Super Bowl, one of the last few slots NBC had available. Hammer will bring a veteran's touch to the endeavor, having starred in this Lay's Super Bowl spot in 2005. And McMahon is no stranger to corporate sponsorship himself. In fact, when they finally establish the Hall O' Fame for Eazy Money Infomercials, Cash4Gold may end up right alongside McMahon alma mater Publishers Clearing House.

It's not clear to me whether there's an intentional ironic element here, given that both Hammer and McMahon are famous for their serious financial woes. Hammer blew through a multimillion-dollar fortune in a few years, and McMahon recently contended with a near-foreclosure on his Beverly Hills home.

On the other hand, it could be a brilliant sympathy play. Times are just as tough for these faded stars as they are for average Americans. Which is why, obviously, we should all dross our valuables.

"As a nation, we are in uncharted economic territory, and Cash4Gold’s rapid growth is a clear indicator of our new reality," CEO Jeff Aronson said in a press release trumpeting the signings. “Since the credit and housing market collapses, Americans are feeling strapped for cash. Cash4Gold.com has become the reliable source of fast cash for anyone who needs it, without driving them any further into debt.”

For his part, Hammer seems excited about the whole affair. He sent out a tweet today noting he was on his way to Tampa: "Got to work that SuperBowl.... 'Melting Gold Baby' .... fun commercial !!!"

Let's hope that he was just typing hastily there, and that the commercial isn't actually called "Melting Gold Baby." That would be an immodest proposal indeed.

-- David Sarno

Snuggie warming up on the Web

The Snuggie is coming ... take cover. The brilliant "blanket with sleeves" that you may have seen on TV (or YouTube) has come to occupy that paradoxical place in pop culture where the very same sharp-tongued bloggers who deride the product as the apotheosis of our dissolute, overweight, depressed and lonely couch potato society secretly also covet a matching set. It is, after all, difficult to argue with the impeccable logic of the Snuggie: 

The Snuggie keeps you totally warm and gives you the freedom to use your hands, so now you can work the remote or read a book in total warmth and comfort. Use your laptop without being cold, or enjoy a snack while staying snuggly warm. 

Hear that, bloggers? Use your laptop without being cold. You know you want one. And if you think it's ridiculous that Snuggie suggests it's good for "staying cozy and warm at sporting events," just think about it: people already bring blankets to ball games, so ... why not add sleeves so you can eat your Dodger dog or catch a fly ball?

Snuggie buzz has begun to increase exponentially -- just check out Facebook's Lexicon feature, which measures chatter about certain words and phrases. The Snuggie is taking off! Google shows a similar warming trend (note that Snuggie is smothering the Clapper). And parody videos have already sprung up to mock the Snuggie's greatness -- a sure sign that a meme is catching on.

— David Sarno

Online merchants got lumps of coal from Santa this holiday

Online sales during the crucial holiday shopping period dropped 3% this year, faring worse than expected after posting annual double-digit increases for the last six years, according to a new report by ComScore. Here's how the research firm's chairman, Gian Fulgoni, put it:

This marks the first time we've seen negative growth rates for the holiday season since we began tracking e-commerce in 2001. The combination of having five fewer shopping days between Thanksgiving and Christmas and the severe economic headwinds faced by consumers has made this a really tough season for retailers, both offline and online.

Between Nov. 1 and Dec. 23, U.S. online merchants rang up $25.5 billion in sales, down from $26.3 billion during the same period last year, ComScore reported. This was despite a 15% bump in sales on Cyber Monday, the first workday after Thanksgiving. The firm had initially forecast flat sales for the holiday period. The picture looks even worse when October sales are included. Sales declined 4% to $36.8 billion between Oct. 1 and Dec. 28, according to ComScore tallies.

Traffic to e-commerce sites, however, grew 5% in the December days leading up to Christmas, suggesting that shoppers were busy trolling the Web for deals. According to ComScore, sites that saw traffic grow include Amazon (up 7%), Apple (19%), Hewlett-Packard (28%) and Wal-Mart (4%). Traffic losers include EBay (down 4%), Circuit City Stores (21%), Overstock.com (16%) and Dell (17%).

Those sites are probably asking the same questions economists are: Where's bottom?

-- Alex Pham

Photo by Star5112 via Flickr

Cyberspace shopping: easy on the spirit

(Image by flickr user garethjmsaunders)

Dreams of an egalitarian, people-driven Internet are being trampled by ruthless corporate hegemons who will not stop until they’ve built the Web into a giant Babylon of mindless commerce.

Translation: Online shopping is better than ever!

If you did even a little of your holiday gift buying online, you know that doing it from your desk beats the madness of a “physical” shopping spree on just about every count — especially in L.A.

Growing up in Massachusetts, Heather Sabin used to hit the mall with friends or family and make a festive day out of seasonal shopping. But that was another century. “Now that I live out here, it’s like, forget it,” said the 35-year-old film archivist, who lives in Hollywood. “It’s just miserable, the idea of going to the mall and fighting the traffic. You can get such good deals and free shipping when you do it online, so it just seems crazy not to.”

If they haven’t made a National Lampoon movie about the Murphy’s law-riddled process that is modern Christmas shopping, they should. Open with a shot of the antihero backing out of his driveway at 4 a.m., only to find that the bumper-to-bumper traffic begins around the corner. Then his hypothermically long walk from a far-flung parking spot to the entrance of Wal-mart. He is injured in a Pamplona-style bull run through the aisle but retrieves the doll. And we end with the tears of a child whose defective Elmo, once tickled, never stops its insane cackling.

Avoiding all these hassles may be why those who have forsworn brick-and-mortar venues seem so serene. Nayer Khazeni, 34, was nowhere near a parking lot last weekend. Having spent three hours online buying music, book and spa gift certificates for friends and family, the San Francisco medical scientist promptly took off on a vacation to Peru.

The best part of online shopping? “I can do it on my own time,” Khazeni wrote in an e-mail. The Internet never closes, so she could shop during breaks at the hospital, “even if that’s in the middle of the night.”

With the nation’s traditionally profligate spending habits stuffed in a mattress this year, retail sales are sagging both online and off. But beneath that morose trend lies another more permanent one ...