The letter Danny Stein didn't write

As is amply clear from recent postings on the eMusic message boards and comments on 17 Dots, eMusic pretty much made a hash of its announcement of the Sony agreement, angering current subscribers not just about the accompanying price increases but also the way in which eMusic CEO Danny Stein’s 17 Dots blog post addressed—or rather, didn’t address—those increases. While I’m quite unhappy about my personal eMusic habit more than doubling in price, I can also see the economic justifications for why eMusic did what it did. I thought it would be an interesting experiment to create a fictional letter to subscribers that Danny Stein might have written in some alternative universe.

My goal was to write something that treated eMusic subscribers as the mature intelligent adults they (mostly) are, while still announcing all the service changes that eMusic made, including the more unpopular ones. Remember, this is a work of fiction. I don’t work for eMusic, do not in any way speak for eMusic, and have no formal relationship with eMusic other than as a usually-satisfied customer.

Without further ado, my imaginary missive (with footnotes from me as indicated):

Dear eMusic subscriber,

I’ve been actively involved with eMusic for several years as CEO of Dimensional Associates, the company that acquired eMusic in 2003, and as executive chairman and now CEO of eMusic itself. [1] The eMusic staff and I are proud of eMusic’s position as the internet’s corner music store, offering a deeper, more personal alternative to mass market digital music retailers, at prices that provide good value compared to other retailers’ standard pricing. Over the years we’ve worked to make eMusic better by increasing the depth and breadth of music we offer and the help we provide to make music discovery easier. Today I’m writing to tell you about the latest evolution of eMusic and how it will affect you.

Our focus from the beginning has been on music from independent labels. We are proud to offer more than five million tracks from over 60,000 record labels that span every conceivable music genre. We also strongly believe in providing music listeners digital music in industry-standard formats free of DRM and related restrictions, and our independent label partners were early leaders in selling music as high-quality MP3 files. However at the same time we believe that great music is great music wherever it comes from, and the major labels of today offer extensive catalogues of quality music from many of the most innovative labels and artists in history. We’ve therefore talked with various of the major labels over the years to try to find ways to offer that music to our subscribers in DRM-free form at a price that provides good value to our subscribers and in a manner that’s consistent with our focus on helping our customers expand their listening horizons. [2]

Today I’m pleased to announce that we’ve reached an agreement with Sony Music Entertainment to offer our U.S. subscribers access to music from the catalogues of labels like Arista, Columbia, Epic and RCA, beginning later this year. This agreement (which we’re working to extend to non-U.S. subscribers as well) will include all Sony releases more than two years old [3], and will bring to eMusic works by artists including the Strokes, Bruce Springsteen, Leonard Cohen, The Clash, and many more. We’ll continue our tradition of helping you discover great albums and tracks among this wealth of music, through recommendations, reviews, and in-depth articles from our knowledgeable staff. Our editorial director Yancey Strickler has more information on how we plan to integrate these new releases into eMusic while continuing to highlight the independent offerings that have always been the heart and soul of the eMusic experience.

Our goal in offering music from Sony (and perhaps other major labels in the future) is to make eMusic a more attractive and comprehensive service to current subscribers and new subscribers alike. We also want to attract even more independent labels, and more releases from the independent labels already on eMusic. That means finding price points for music that provide good value to our subscribers while still enabling all our label partners (both independent and major) to profitably offer their releases through eMusic under our traditional subscription-based model. [4] Based on our discussions with Sony as well as with our independent label partners, we’ve concluded that a per-track price of at least $0.40 [5] will enable our label partners to make eMusic a sustainable business proposition and us to continue to invest in improving the service we offer to you, while still providing a significant value compared to the typical prices offered by other digital music services.

We’ve therefore changed our eMusic U.S. plans to reflect this new approach, with an eMusic Basic plan now offering 24 downloads for $11.99 per month ($0.50 per song) and other standard plans offering better prices (as low as $0.41 per song) in exchange for higher monthly commitments. We’ve also changed the pricing for our non-U.S. plans to be more consistent with U.S. pricing, and in anticipation of our being able to offer more labels’ music to our subscribers outside the U.S.

When making past price changes we’ve offered at least some existing subscribers the option to continue their plans at the previous price levels. Unfortunately we can no longer continue that practice; it is not financially sustainable in the long run, and arguably is also unfair to more recent subscribers who cannot take advantage of older plans. [6] We’re therefore requiring all subscribers under such grandfathered plans to select from one of the current plans when their existing plan refreshes. We will offer you the default choice of a current plan most similar to your existing plan.

We recognize that these new plans represent a significant price increase over previous plans, especially for long-time subscribers and subscribers with Plus, Premium, and Connoisseur plans, and could make eMusic less attractive to many current subscribers. We appreciate having your business over the years, and we hope you’ll stick around to check out our new expanded offerings and the many other improvements we’ll be making in the coming months and years. For those subscribers active as of August 1 we’ll provide a free 15-track booster pack as a small token of our appreciation for continuing your subscription.

We’re also working to make eMusic a better value by addressing a long-standing issue with our track-based subscription model. We know that many of our customers are avid listeners who tend to purchase entire albums, not just individual tracks. Unfortunately purchasing an album with a very large numbers of tracks through eMusic is often more expensive than purchasing the same album from other digital music retailers. We’re moving to correct this problem by offering album pricing that will allow you to download selected albums of 12 or more tracks for the price of 12 downloads. [7] In cooperation with our label partners we will work to extend this album pricing to more and more releases over time, so that eMusic subscribers don’t have to hesitate before deciding to download a complete album.

This is a major event in the history of eMusic, and we understand that many of you are concerned that the eMusic you know and love will be no more. The eMusic staff and I are committed to ensuring that eMusic remains the best place on the Internet for discerning listeners to discover and purchase new music at value prices. We appreciate your past business, and hope you’ll continue to be part of the eMusic community.

Yours truly,

Danny Stein [8]

1. Danny Stein became CEO after the resignation of David Pakman, who had been CEO since the Dimensional Associates acquisition.

2. In several interviews over the years David Pakman spoke of his desire to have eMusic offer back-catalog material from major labels in addition to independent label releases. Apparently at least one such deal was approved by middle management at a major label, only to be killed by senior management.

3. As noted above, eMusic’s focus was always on obtaining rights to sell older major label releases. I’ve never seen any indication that eMusic wanted to go head-to-head with the iTunes Store and Amazon in selling new major label releases. Also note that many independent labels have held new releases back from eMusic in an attempt to maximize revenue from other higher-priced outlets, in an attempt at price discrimination.

4. Recall that under eMusic’s business model payments to labels are sensitive to both the nominal per-track prices (i.e., as defined in the plans) and the fraction of downloads that are paid for but never used (what David Harrell of The Layaways refers to as digital breakage). The more downloads go unused, the higher the per-track payout. (Again, David Harrell has a thorough discussion of how this works in practice; see also eMusic’s own explanation to labels.) Labels typically have to pay a fixed amount of royalties to artists and songwriters for each track, so per-track payouts that are too low mean that labels cannot profitably sell through eMusic. Thus per-track pricing has in the past been a point of contention between eMusic and various independent labels.

5. As can be seen from my overview of the new US pricing, no published eMusic plan offers a nominal per-track prices of less than $0.40. (Some existing subscribers have been offered a non-published plan that works out to about $0.39 per track.) I therefore conclude that having a hard floor at $0.40 per track was a key element of eMusic’s agreement with Sony; in practice the actual average per-track price will be higher, due to both digital breakage and the fact that most eMusic subscribers will be on plans that are more expensive on a per-track basis.

6. The discontinuation of the grandfathered plans is arguably the most controversial part of the changed pricing, both because long-time subscribers with such plans are disproportionately represented among eMusic message board posts, and also because eMusic is viewed as having made a firm commitment to continue grandfathered plans as long as the customers in question continued as subscribers. The argument that offering grandfathered plans is unfair to new subscribers is somewhat weak, but it’s the best I could do on short notice.

7. Assuming a floor price of $0.40 per track, under album pricing a complete album would cost about $4.80. Amazon offers a few albums for less than this as part of its special Daily Deal program, but this would be an everyday low price for eMusic, at least for those albums selected for album pricing. I think album pricing could be a significant improvement to eMusic, but unfortunately eMusic did a poor job of communicating where this might apply and what eMusic will be doing to expand the number of albums offered this way.

8. One more time: Danny Stein didn’t really write this letter, I did.

13 thoughts on “The letter Danny Stein didn't write

  1. Amanda (NankerPhledge on eMu)

    That would work a lot better for me. You can only sweeten such bad news so much, the difference between a concerned perhaps even unhappy but placated customer and a furious customer ready to tear up the contract is honesty in how the news is delivered.

  2. Johan Anglemark

    Yep, this is the letter he should have written. Perhaps also including something about how eMusic has been facing complaints by some labels already onboard for not paying them enough.

  3. Brendan

    I’d like to think that if this letter had appeared a few days ago instead of the original one then there would be slightly less of an uproar. Of course, the unanswered questions are still there (album pricing, grandfathered accounts, etc.) but at least the presentation could have been more cogent, forthright and sympathetic towards the customers.

  4. Tony

    In my own greed, I’ll be sad to see my .25/track deal go away, but as anyone paying emusic less than 30-some cents a track has to realize, someone’s losing money on me, as I use all my downloads every period. I’ve woken up, and I’ve smelled the coffee.

    But OTOH, I have been very casual with music purchases when the price is that low, including springing for a whole album based on only a track or two.

    Will I spend 5 Bucks for MP3s of an unheard album? Probably not.

    Will I spend 5 bucks for MP3s of a Sony “Nice Price” CD special? Probably not.

    Will I get a plan that costs me 50 cents for an MP3? No. Absolutely not.

    But I’ll hold on. Sony is about a lot more than old Dylan and Springsteen and Janis Joplin and Billy Joel. They have lots of Masterworks catalogue I’d love to see and select tracks from. Sometimes you just want to buy some Lotte Lenya at 3 in the morning, y’know?

    While the inventory at my local used-CD store has arbitrary restrictions (not every title is in all the time), I’ll be going back there more, I think. After all, I endure the arbitrary restrictions of eMusic’s selection, too.

  5. Nergal

    Frank, again again wonderfully thought out. That’s why I’m so happy to have you in my RSS’s
    One note (for future readers) could you use an anchor tag on the Endnotes i.e. click [4]in the text jump to note 4 click [4] in the note jump back to text 4
    Again frank always great to read your items šŸ™‚
    (I still say I’m glad for the chance at the columbia jazz and classicals)

  6. qwynwyn

    This is a great letter that Danny Stein should have written! Seriously! Oh well. I wonder who gave him feedback about his letter….

  7. david

    yes, this would have been much less upsetting than what he posted. You have to wonder about a company when the leadership is clearly incompetent!

  8. EV Debs

    I do think this letter puts the best possible spin on things. No offense, but it’s really not so hard to write a letter like this.

    So why didn’t they?

    The Sony/price increase roll-out has really been a case study in bad marketing. It’s just incredible to me that they’d do it so poorly. And as far as I can tell, they still haven’t figured out the damage they’ve done. At least judging from the traffic on the eMu message boards, the two official responses–which essentially try to continue the happy talk–have been understandably met with more rage.

    At the very least, whoever came up with this strategy needs to get sacked.

  9. EV Debs

    Incidentally, have you noticed that they’ve also quietly gotten rid of unlimited re-downloading? After four downloads they’re now going to start to charge you.

  10. Andrew

    I’m all for the price increase, as long as the artists benefit!

    My favorite music has mostly been on indie labels. Ironically, since subscribing to eMusic, most of my physical CD/LP purchases have been major label releases unavailable from eMusic.

    I actually prefer the MP3 format, as I’m running out of physical space for my record collection. Several of my favorite indie artists have spoken out against illegal MP3 downloads. I subscribed to eMusic to support the artists.

  11. Manny

    Nice job on easing the subscribers’ pain. You obviously could never be a corporate titan. (that’s a compliment.)

  12. UsedToLikeEMusic

    eMusic also neglected to mention an innovation that is unique in the market place: that some album purchases will not work in the subscribers favor – i.e., fewer than 12 tracks are there, with at least 1 requiring album purchase, and eMusic charges 12 credits. I provided the following example when I asked eMusic about this because I thought it was a mistake:
    http://www.emusic.com/album/Herbie-Hancock-Head-Hunters-MP3-Download/11478633.html, but there are many others, including some full-length album tracks that require 12 credits:
    http://www.emusic.com/album/Harry-Henshaw-Insomnia-The-Ocean-Soothing-Relaxation-Music-Wi-MP3-Download/11258699.html. In this case, this isn’t even a Sony track – it used to require just one download under the old pricing.

    Here is what they wrote to me:


    Thank you for contacting eMusic Customer Support.

    Perhaps the easiest way to understand album pricing is to think of it like buying a CD. The cost (credits required) of an album is independent of the track count (just like a CD). Some albums don’t offer album pricing at all: the credits required to download the entire album equals the number of tracks. More often, you’ll see albums with 12+ tracks offered at 12 credits. Sometimes you’ll see an album priced at 12 credits when it has fewer than 12 tracks, as in the example you’ve given. Usually this happens when an album is comprised of very long tracks, but it may also be stipulated by record company licensing agreements.
    Regards,

    Kenneth – eMusic Customer Support

    Yay – way to look after your customer base, eMusic. iTunes doesn’t even do it that way.

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