Tag Archives: emusic

The end of eMusic and me

Last week I cancelled my subscription to the eMusic digital music service, a subscription I paid for faithfully for over ten years. I spent a few years of my blogging life writing about eMusic as a subscriber, so it’s appropriate to mark the end of my subscription with one final post.

eMusic has gone through many business models over the years, but at the time I joined it was a would-be solution for people who wanted to listen to lots of music, especially music out of the mainstream, but had only a limited budget to pay for it. Operating in the post-Napster era, eMusic focused on people who wanted to download tracks and albums as MP3 files, and would commit to pay at least $10 a month for the privilege. Initially the service allowed “unlimited” downloads for one fixed price. This was after the major music labels had sued Napster into submission for offering a similar service at no charge (and without authorization by copyright holders, of course), so even with the promise of payment no major labels were willing to sign up. The offering was thus limited to independent music labels, and even then much of the music available was only marginally appealing (to put it politely).

eMusic’s history since then can be summed up as adapting to the realities of the music business by compromising on the original vision of “all you can listen to, one fixed price”. First, people who tested the limits of “unlimited downloads” were put on a diet—eMusic’s obligation to pay per-track royalties meant that heavy downloaders cost more to eMusic than their subscription fees brought in. Then (after being acquired by a private equity firm) eMusic put fixed limits on the number of tracks that could be downloaded per month. Even with the download limits per-track prices were still well under what mainstream services like iTunes and Amazon were offering, so major labels still refused to participate and eMusic was still focused almost exclusively on independent labels.

That focus was blurred when eMusic was finally able to attract major label releases by Sony, at the expense of imposing a major price increase on users. At the time only older releases were available, not current releases, but later eMusic further revamped their pricing, including the introduction of “album pricing” (i.e., purchasing an album at a fixed price and not track by track), in an ultimately successful attempt to persuade more major labels to offer more releases on eMusic. Today most albums on eMusic are only slightly less than what they cost on Amazon or iTunes.

Through all of this I maintained my eMusic subscription. So why am I quitting now? First, eMusic’s business model no longer worked for me: I was paying over $10 per month for a subscription, and per eMusic’s traditional “use it or lose it” subscription model I was paying that whether I downloaded anything or not. More and more I just didn’t have time to evaluate which albums I wanted to download; a couple of months I forgot to download anything at all.

Second, eMusic’s original vision of “all the music you want, one fixed price”, the vision that was so attractive to avid listeners and then so compromised by business realities, has now been realized in the form of streaming services like Spotify. In the Napster era advances in broadband networking made it possible to download music tracks as MP3 files as an alternative to buying CDs, and the convenience of getting instant access to music drove adoption of digital music. Continued advances in networking make it possible to stream music straight to devices (even mobile devices on cellular networks) as an alternative to downloading MP3 files, and the ability to listen to (almost) any track instantly without an additional purchase is driving adoption of streaming services.1

Thus as soon as I cancelled my eMusic subscription I upgraded my Spotify subscription from the $5 per month “unlimited” level (which I used for ad-free listening on my laptop while at work) to the $10 per month “premium” level, which provides ad-free listening on all devices, including smartphones and tablets. The major remaining barrier to widespread streaming for myself and others has been the fear of blowing through cellular data plan limits while listening in the car or otherwise away from home. One carrier, T-Mobile, is trying to remove that barrier by exempting selected streaming services from data limits; it’s no coincidence that I’m considering switching to T-Mobile in the coming months.

However even if I switch I’ll still be stuck in the past to a certain degree, since unlike many nowadays I actually pay for the music I listen to: The “new normal” for young people is to listen to ad-supported streaming services, whether in the form of the free Spotify plan, “Internet radio” services like Pandora, and iTunes Radio, or music tracks uploaded to YouTube. What this trend means for the music industry in the future is a bigger story; maybe I’ll come back to it another day. In the meantime I’ll reserve my MP3 purchases (just as I’ve been reserving my CD purchases) only for music that’s special to me, or that I can’t get any other way.

1. The trend to streaming has also been accelerated by a feature of copyright law in the US and elsewhere that mandates much lower per-track royalties for streaming services than for download services like eMusic. This makes it possible for an “all you can eat” streaming service to at least have a shot at profitability, something that was impossible for the original eMusic unlimited download service.

eMusic to offer streaming?

In reading the recent New York Post article EMusic mulls sale as digital market shifts (pointed to by eMusic subscriber okierambler in a recent message board thread), the most interesting part to me was actually at the very end of the article:

Sources said eMusic’s backers … are also seriously considering adding a streaming component in a bid to build upon its recent growth.

… According to sources, the streaming component would be a value-added feature for premium subscribers.

The thinking is that the economics of a download-only model and a streaming-alone model don’t work on their own, but putting them together in a tiered system could help retain subscribers.

I think adding a streaming option would be a great idea, not as a substitute for downloading but rather as an easy way to audition albums before deciding whether or not to spend my (limited) downloads on them. I wrote a lengthy blog post on this topic back in October (Should eMusic offer streaming?) discussing the pros and cons of this. I doubt my post influenced (or was even read by) anyone at eMusic, but it’s nonetheless gratifying to see eMusic apparently considering integrating streaming capability into the service.

I’m curious as to whether anyone else subscribing to eMusic shares my opinion on this, or whether people are looking to Spotify or other ad-supported or freemium services to provide your streaming fix. In this connection it’s unclear what any potential eMusic streaming service would look like. Here are some open questions along with my speculations and opinions to supplement my earlier thoughts:

Standalone service vs. tied to current eMusic service. The New York Post article claims the proposal is to offer streaming as an add-on to the current service, not as a standalone service. I think this is the best way to approach it—position eMusic streaming as a useful option to enable easier music discovery for eMusic subscribers, not as a competitor to Spotify, etc.

Extra-cost option vs. bundled into existing plans. The New York Post article is unclear on this point; however the phrase value-added feature for premium subscribers implies that streaming would be bundled into the overall eMusic subscription price for the higher-priced plans, and not offered at all for the Lite, Basic, or (maybe) Plus plans. I think bundling makes sense if streaming were positioned as a aid to music discovery for people who listen to and download a lot, and not as a substitute for downloading.

Right now I’m paying for a combination of the eMusic Basic plan (annual) and a $5/month Napster subscription for streaming (and some extra downloads — though remembering to actually download them is a PITA). If eMusic were to offer streaming I’d happily drop Napster and upgrade my eMusic plan to a Plus or even Premium plan. (I skipped getting a Plus plan when the recent price increases hit because of concern about wasting the extra downloads on stuff I wouldn’t like that much. Being able to try before I buy via streaming helps alleviate that concern.)

Unlimited streaming vs. a cap on streamed tracks. Of course I’d like any eMusic streaming option to not have a fixed limit on streams per month. However if eMusic has to pay streaming royalties on a per-track basis then it might make sense for it to impose a monthly limit on streams per subscriber. Since I’d be using streaming primarily to try out stuff before I download, I could probably live with a maximum cap of (say) 10 times the number of my download credits, e.g., 500 streamed tracks per month to go with a Premium plan offering 50 download credits.

Streaming tracks vs. (only) streaming albums. Would eMusic allow streaming individual tracks without restriction (other than a possible cap on streams per month), or would eMusic and/or the labels try to bring into the streaming world the concept of album only tracks (i.e., not allowing you to stream particular tracks unless you streamed the entire album)?

If eMusic allowed streaming individual tracks on an a la carte basis then labels might see this as a way for subscribers to evade the album only restrictions, especially for albums with a small number of tracks. (Don’t download that 2-track electronic release for 12 credits, just stream it instead.) On the other hand, to my knowledge no other streaming service implements album only restrictions of any kind, and I suspect the business and royalty model for streaming is different enough to make such restrictions unnecessary or at least not desirable.

Tied to PC vs. available on smartphones. The conservative approach would be for eMusic to implement streaming only in the context of the current web-based download service. For example, if you had the streaming option then the Listen to this album and Listen to this song buttons on an album page might be configured to play the full (streamed) album or track instead of just 30-second samples (as at present).

eMusic might also offer a standalone streaming app for smartphones, like the various iPhone apps for Spotify, etc. However I doubt that eMusic is eager to compete directly with (or be compared to) the streaming-only services, and there would be a number of non-trivial business issues that would have to be dealt with in creating an eMusic offering for mobile devices. Also, I think mobile streaming is more useful as a replacement for terrestrial and satellite radio than as an adjunct to a download service. I think that if eMusic does offer streaming that it won’t be for mobile devices, at least initially.

So, my final prediction: Sometime in 2010 eMusic will offer streaming as a bundled feature of the Premium and Connoisseur plans (but not Lite, Basic, or Plus). It will not cost anything extra, however introduction of streaming may occur in conjunction with a further round of (relatively small) plan price increases, possibly associated with adding more major label content. For those eMusic subscribers who have streaming, it will happen transparently using the existing Listen to this album and Listen to this song buttons on album pages. Such subscribers will be able to stream any album or individual track on eMusic, without any restrictions except possibly for a cap on total streams per month that is tied to the number of plan downloads.

There will not be an option to stream to smartphones or similar mobile devices (e.g., e-book readers with wireless capability), with the possible exception of devices that connect via wifi and have web browsers that provide equivalent support for eMusic downloading and streaming to that of standard PCs. (However even this may be restricted in some cases for business reasons.)

Your thoughts?

Some kind of a party

A while back my copy of iTunes saw fit to present me (for the first time?) with a party playlist. I honestly can’t imagine any party that would have this as a playlist, but the bizarre randomness of it all intrigued me and prompted me to present the unexpurgated list to the world (with comments where appropriate and links to eMusic downloads
where available):

  • Eve Beglarian, Far Off Country (Four), performed by Maya Beiser, from Almost Human. I like this album but have a bit of aversion to spoken-word accompaniments to classical tracks, like those here.
  • Neutral Milk Hotel, Two-Headed Boy Part 2, from In The Aeroplane Over The Sea. This album is legendary among people who know it, but I have to confess I feel more admiration for it than love.
  • Mogwai, I’m Jim Morrison, I’m Dead, from The Hawk Is Howling. I’m a major Mogwai fan, but on first listen I thought this was relatively minor Mogwai. I’ll have to give it another try.
  • Arvo Pärt, Nunc dimittis, performed by the Estonian Philharmonic Chamber Choir, from Da pacem. I’ve been a big Pärt fan ever since picking up Litany (based on a recommendation in Wired, oddly enough).
  • Tristania, Angellore, from Widow’s Weeds. An experiment on my part in venturing into the melodic metal arena; not bad, but I’m still not that interested in metal.
  • M.I.A., Fire, Fire, from Arular. I was dining at Fatburger, which features a free jukebox with a net connection, when someone played Paper Planes from Kala. I decided to reciprocate by playing Galang Galang from this album.
  • Eve Beglarian, Far Off Country (One-Two), performed by Maya Beiser, from Almost Human. iTunes put two tracks from this album onto the list; I have no idea why.
  • Dumptruck, Better Of You, from For the Country (not on eMusic). In my opinion this is one of the best non-country country albums ever recorded, right up there with Meat Puppets II.
  • The Fall. An Older Lover etc, from Palace of Swords Reversed (not on eMusic). I have lots of Fall albums; this is one of the better ones.
  • Johann Johannsson, Englabörn, from Englabörn. I like Johannsson but don’t recall liking this album as much as IBM 1401: A User’s Manual.
  • Amiina, Saga, from Kurr. Another Icelandic production, not in the league of Bjork or Sigur Rós, but well worth listening to.
  • Team Dresch, Hate the Christian Right!, from Personal Best (not on eMusic). The Butchies have their charms but are no substitute for this band. Supposedly Team Dresch have reformed and are (maybe?) recording a new album; I always worry about this sort of thing but am definitely looking forward to it if it ever happens.
  • The Wedding Present, I’m Not Always So Stupid, from George Best Plus. I listened to this album only once; it was a bit too much of its time for me.
  • Super Furry Animals, Patience, from Rings Around The World. Another album I listened to only once, and need to try again.
  • Bocuma, Boards Of Canada, Music Has The Right To Children (not on eMusic). CollabNet didn’t really take off as a company, but I have to say that my co-workers there (who recommended this to me) had great taste in music.

Should eMusic add streaming?

In two previous posts about my current use of eMusic I discussed my musical jobs to be done and how I might now supplement eMusic with other services in order to optimize the use of my more limited number of eMusic downloads. One of the things I noted is my need to audition music prior to downloading it, which naturally leads to the question: Should eMusic create a streaming service to complement its current download offering? As I discuss below, I think it should, but only in a way that is consistent with eMusic’s current value proposition and business model.

Before getting into my own proposal I should address two possible answers to this question that reflect conventional wisdom. The first is simply to assert that streaming is the future way music will be delivered to listeners, and that services like eMusic that offer downloads are ultimately doomed. One sees this attitude reflected in the hype around Spotify, for example, as embodied in comments from Bob Lefsetz and others.

On the other hand, streaming services face a variety of obstacles both from a consumer point of view and from an industry point of view. As a listener my concern with relying solely on a streaming service is twofold: First, I’ll want to listen to music in contexts where there’s no network through which to stream. This concern can be addressed to some degree by offline caching of tracks; this is essentially what Spotify offers as part of its premium service.

However note that for various reasons such offline use is typically implemented using a DRM scheme that expires tracks if your subscription ends. (Spotify is no exception in this regard.) This restricts portability (you can use only approved devices) and doesn’t address a second concern: That I’ll lose access to my favorite music due to the actions of the service, the labels, or others with a legal interest in the music. Recall the recent controversy over Amazon deleting copies of 1984 and Animal Farm from users’ Kindles: what a DRM-based content service giveth, a DRM-based content service can taketh away.

From a music industry point of view the problem with streaming services is that they don’t yet have a viable business model. Even Spotify, the great hope for streaming, has people predicting its imminent death, with its founder begging the music industry to change its ways in order to help make Spotify and similar services sustainable for the long-term. This concern is well-founded; details on Spotify’s business model are hard to come by, but a reasonable analysis concludes that royalties and licensing costs for Spotify are extremely high, and that it’s able to survive for now only through special deals with labels.

My conclusion is therefore that traditional streaming services remain unattractive from both my own perspective (which may be shared by others) and a business perspective. My own concerns can be addressed by the possibility of getting DRM-free downloads, and the financial concerns might be addressable by a business model that eliminates either free-to-consumer streaming (requiring that all customers have a paid subscription) or all you can eat streaming (putting a cap on total number of streams per subscriber per month) or both. As it happens, eMusic subscribers are already required to pay a monthly fee and also have a cap on their use of the service; what they don’t have is access to streaming via eMusic.

This brings us back to the question we started with: Should eMusic add streaming? The second snap answer is that eMusic is by its nature a download service, that eMusic users don’t need or want a streaming service, and that eMusic couldn’t make a success of such a service.

Regarding the first objection: As I stated in my previous posts, I personally need a low-cost way to preview music for my permanent collection, and streaming services offer the most convenient way at present for me to do that. However the lack of such a service at eMusic means that I now have to use a minimum of two services. This is inconvenient for me and in the long run at least is bad for eMusic, since it takes subscribers like me away from the site and lessens our loyalty to the service. I suspect my experience is representative of many eMusic users.

As for the second objection, some might point to the present incarnation of Napster, which at first glance seems to be offering the same thing as a hypothetical eMusic+streaming service: a paid subscription service offering a combination of streaming and MP3 downloads. Yet Napster is seen as gasping in the face of competition from Spotify. Why should an eMusic+streaming service be any more successful?

The answer is that eMusic would not be trying to compete directly against Spotify. Rather it would simply be trying to better serve the existing eMusic subscriber base and offer a more attractive value to prospective subscribers, while doing so in a manner that is consistent with eMusic’s business model. Thus streaming in the context of eMusic would not be positioned as a primary service; instead it would be positioned (at least initially) simply as a way for subscribers to try out releases before they download them—an extension of the current Listen to this album function on every eMusic album page that plays 30-second samples of tracks.

(In the longer term eMusic could also offer standalone streaming, most notably in the form of an app for mobile devices such as the iPhone; this would allow eMusic subscribers to also audition releases in their cars and on the go, again without having to switch to a non-eMusic service. It may be better for eMusic to wait on this until it can offer the complete eMusic experience in a mobile context, including over the air downloads; however for business reasons, including existing eMusic contracts with wireless carriers, that may not be possible for quite some time.)

In order to minimize the impact on its existing cost structure and business model, eMusic could and (in my opinion should) put fixed limits on the number of tracks a subscriber could stream per month. For example, we can imagine an eMusic Basic plan that would offer 24 download credits (the same as today) along with the ability to stream up to 100-200 additional tracks (or 10-20 albums) on demand. How big could this limit be? It’s very hard to tell. Royalty arrangements for on-demand streaming are fairly complicated, with separate royalty streams going to labels and to songwriters and publishers (mechanical royalties). In some cases these royalties are paid on a per-track basis, and in some cases they are calculated as a percentage of revenue. (This discussion thread gives a good feel for the confusion occasioned by streaming royalty arrangements even among people involved in the music industry.)

I’ll leave it to others to figure out exactly what level of streaming service eMusic could offer profitably, and at what price point. Streaming capability could be offered as an extra cost option to the current plans, or bundled into future versions of the standard eMusic subscription plans (for example, as part of some future round of price increases). The important part is not the exact pricing, it’s offering a service that is well-integrated into the current eMusic offering, financially sustainable for eMusic, and perceived as a good value by its customers.

In this regard the division between downloads vs. on-demand streaming vs. automated streaming (Internet radio) is an artificial one from the point of view of customers. At heart eMusic is not a download service per se; it is a music service that delivers a particular type of experience to a particular type of customer. The first paragraph of the eMusic story says nothing about MP3 downloads; it talks about a more immersive, authentic music experience, better prices than mass market digital music retailers, the most musical context, subscription-based pricing that rewards discovery, and other aspects that eMusic thinks are key value propositions for the service. If adding a streaming component (or for that matter an Internet radio component) would enhance those aspects then eMusic should seriously consider investing in such improvements.

In the end there are two general ways forward for digital music services. The first is exemplified by Spotify today and by (the original) Napster in the past: attempts to remake the music industry through high-profile, potentially high-reward, and (to one degree or another) high-risk business strategies. The problem is that in a fundamental sense the music industry doesn’t want to be remade: There are multiple actors with their own interests, an attachment to traditional ways of operating, and both legal precedent and political clout to back them up; even with general consensus that the industry is in crisis the collective action problem is daunting. In the long term the structure of the industry may indeed change as new genres and industry players emerge, but this may take 10-15 years or more (as I’ve previously argued). In the meantime services like Spotify may achieve some measure of success, but it’s equally likely that they’ll just crash and burn as they run out of cash.

The second approach is the one that I think is most suited to eMusic: To work within the realities of the music business as it exists today and then to do what one can to serve customers best within those constraints, aiming for consistent profitability and growing the customer base organically (being patient for growth but impatient for profits, as Clayton Christensen puts it). To use a sports analogy it’s like hitting for singles in baseball instead of swinging for the fences, or having a consistent ground game in football vs. throwing the long bomb.

It’s an unexciting strategy to be sure, but then eMusic at present is an unexciting company. With the collapse of the rumored acquisition of eMusic by Amazon eMusic’s owner Dimensional Associates lost any immediate prospects for selling eMusic at an attractive valuation. Now with eMusic’s subscriber base relatively stagnant and the company’s image damaged by the Sony PR debacle, eMusic’s only hope in my opinion is to execute well, become consistently profitable, and achieve long-term sustainability. At that point eMusic may become an attractive acquisition candidate for someone looking for a nice boring business with steady cash flow and some plausible prospects for growth.

Now with Swindleeeee!!!!!

It was over six years ago that I first subscribed to the eMusic digital music service, and over three years since I started my blog Swindleeeee!!!!! to provide an outlet for my eMusic-related musings. My posting frequency (never that high) has in recent months fallen off drastically. I either don’t have anything I want to write about eMusic, or I don’t have time to write anything.

Rather than have Swindleeeee!!!!! join the millions of other blogs that have dribbled off into nothingness, I’ve decided to give it a dignified exit. More specifically:

  • I’ve moved all my old Swindleeeee!!!!! posts over to this blog under the music category, in case you ever have occasion to read them or link to them.
  • If you subscribed to Swindleeeee!!!!! using a newsfeed reader (e.g., Google Reader, NetNewsWire, etc.) and you want to see my future posts on similar topics, please subscribe to my music-related posts on this blog using the new feed URL http://blog.hecker.org/category/music/feed/.
  • As time permits I will redirect I’ve redirected all permalinks for the old Swindleeeee!!!!! site to the corresponding posts on this blog, so that the old URLs will still work for anyone who’s referenced them in a blog post or other context.

Thanks to all of you who read and commented on Swindleeeee!!!!! posts. Please continue reading this blog if you’re interested in what I might have to say on eMusic and the music industry.

Is eMusic moving away from the health club model?

As all long-time eMusic watchers are aware, eMusic’s business model has always been based on the health club model, i.e., the assumption that a certain percentage of customers will pay for but not use the service. In eMusic’s case that corresponds to subscribers who download fewer tracks per month than they’re paying for. The result of these unused tracks or digital breakage (as Digital Audio Insider refers to the phenomenon) is that the per-track payout from eMusic to labels was somewhat higher than it would be otherwise. That in turn made distribution through eMusic somewhat more attractive to labels that the nominal per-track pricing might otherwise indicate.

However with the recent price increases and the introduction of album pricing I suspect that eMusic is consciously moving away from reliance on digital breakage. One problem of eMusic’s model from the labels’ point of view is that the per-track payouts were in no way guaranteed: If a greater percentage of eMusic subscribers happened to use their full monthly quota of downloads then per-track payouts would inevitably decline. The vast majority of the reported disputes between eMusic and labels, including those labels who’ve left eMusic, revolved around this issue.

I’ve previously criticized labels for the single-minded focus on per-track revenue and profit as opposed to total revenue and profits, but labels have at least two reasons for their position:

  • While per-track payouts might fluctuate, labels typically have fixed costs they need to cover per track, most notably for mechanical royalties paid to songwriters and music publishers. If the per-track payout becomes too low then labels lose money on every track distributed through eMusic, with no way to make it up on volume.
  • As CD sales continue to decline labels are under pressure to maintain their revenue and profits. All other things being equal, the simplest way for labels to survive, at least in the short term, is to try to hold the line on pricing of digital tracks and charge as much as the market will bear. In theory they may be giving up some revenue and profits by pricing tracks too high and thus forgoing sales to more price-sensitive buyers, but (at least based on a recent Billboard analysis) it may be that in practice higher prices do not hurt sales enough to offset the benefit of higher per-track payouts.

One obvious way to increase per-track payouts is for eMusic to increase the price of subscription plans and/or reduce the number of monthly downloads included with a plan. This is essentially what eMusic did with its recent price increases; the eMusic Basic plan had a reduction in number of downloads, while the Plus and Premium plans had a price increase as well. These changes had the effect of fixing a minimum per-track price of about $0.40. However the per-track payout would still vary based on the behavior of eMusic users and the amount of digital breakage in a given month.

Enter album pricing, which as implemented by eMusic in cooperation with Sony and other labels can be thought of as a way to achieve the same effect as breakage while eliminating (or at least minimizing) the element of chance associated with breakage. For example, consider a user on the Basic plan who has a monthly download quote of 24 tracks. In the absence of album pricing the user might in a given month download an album of 4 (long) tracks and another album of 8 tracks, and then not use the remaining 12 downloads. The breakage is thus 50% of the user’s quota, and the effective per-track price is about $1.00 per track ($11.99 divided by 12). However in another month the user might download 18 tracks, corresponding to 25% breakage and an effective per-track price of $0.67, and in a third month might download all 24 tracks in the monthly quota, resulting in a per-track price of only $0.50 and no breakage.

However under album pricing purchasing many albums with less than 12 tracks actually requires 12 download credits, as noted by many eMusic messageboard posters and discussed in a Billboard analysis of eMusic’s recent changes. In our example, instead of using 12 downloads of 24 to download two albums of 4 and 8 tracks respectively, the user could well have to spend 12 credits per album, thereby using up the entire quota of 24. Strictly speaking there was no breakage (i.e., the user spent all the credits to which they were entitled) but the resulting per-track price of $1.00 is the same as under the old plans with 50% breakage.

As more and more albums move to album pricing, it becomes increasingly difficult for a user on a Basic plan to buy more than two albums per month, and if they use eMusic at all it’s like they’ll buy at least two, and thus have no breakage in the traditional sense. In effect album pricing allows labels to remove the element of chance involved in user behavior and manipulate the per-track price themselves (i.e., by designating a particular album of less than 12 tracks as requiring 12 credits, and designating particular tracks as album-only) according to their business objectives.

It’s correct that the per-track price is effectively reduced when an album with more than 12 tracks is sold for 12 credits under album pricing. However in practice this most likely doesn’t matter, since per-track costs such as mechanical royalties typically are not any higher for albums with more than 12 tracks than they are for 12-track albums. (For the full and gory details see the maximum rate per album discussion in chapter 16 of Donald Passman’s All You Need to Know About the Music Business.)

So the labels win in the case where albums have fewer than 12 tracks, and don’t lose in the case where they have more. eMusic keeps the labels happy, and if some users don’t download even the few albums they can now afford (and thus help raise the average per-track price even higher) then it’s just icing on the cake.

Obligatory Michael Jackson post

Given the extent to which Michael Jackson the person was crushed beneath the weight of Michael Jackson the commercial phenomenon, it’s sadly appropriate that his death should allow Sony Music Entertainment and eMusic to conduct a natural experiment in maximizing profits through price discrimination. Jackson’s death has rekindled interest in his music, to the point where Michael Jackson albums now dominate the charts at the iTunes Store and Amazon. As far as I can tell all the Michael Jackson digital releases on the iTunes Store are being sold at full-price; the same is true for Michael Jackson releases in MP3 format at Amazon. Individual Michael Jackson tracks range from $0.99 to $1.29 on both services.

Quite coincidentally eMusic’s recent deal with Sony will shortly result in Michael Jackson’s back catalog being available on eMusic, at prices ranging from about $0.41 per track to $0.50 per track on the new eMusic plans. Since Michael Jackson died before his releases hit eMusic, Sony has a period of a few weeks during which it can sell Jackson’s releases in digital format at full price to buyers who are not price sensitive, after which more price-sensitive buyers are free to buy them through eMusic at significant discounts. For example, an eMusic buyer who doesn’t care about bonus tracks should be able to snag a copy of Thriller for $3.69-4.50 on the standard plans (9 tracks at $0.41-0.50 per track), representing a 50-63% discount relative to Amazon or the iTunes Store.

By having such a delay Sony can maximize profits by avoiding offering lower prices to buyers who are very price-insensitive and must have the albums as soon as possible after Michael Jackson’s death, while still being able to get sales from price-sensitive buyers who don’t mind waiting a bit. (See my earlier blog posts on the economics of the Sony-eMusic deal and optimizing eMusic vs. non-eMusic sales for more on price discrimination in the eMusic context.) It’s essentially the same strategy Sony is employing by holding current releases back from eMusic until two years have passed, only with a much shorter release window for the full price version.

By looking at iTunes and Amazon sales figures before and after Michael Jackson’s albums show up on eMusic, Sony should be able to get a pretty good idea of the extent to which sales through eMusic are cannibalizing sales through other digital music stores. If it turns out that offering Jackson’s releases through eMusic has little or no effect on iTunes or Amazon sales, that would be an argument for Sony reducing the two-year delay for offering other Sony releases to eMusic customers. If this indeed happens it would be an oddly providential side effect of Michael Jackson’s death.

One final thought: My comments above might seem cold and calculating, but they would not have been foreign to Michael Jackson himself, who famously counted his friendship with Paul McCartney as less important than the opportunity to acquire publishing rights to the Beatles catalog. The King of Pop understood that as far as the major labels are concerned the true value of music is simply the present value of that music’s future sales.

UPDATE: As it turns out, the Michael Jackson catalog on eMusic is being sold under the new album pricing plan, which is really just variable pricing under another name. In particular an eMusic customer would be charged 12 download credits for downloading the album Thriller despite it having only nine tracks. Thus the eMusic price for Thriller for US customers would be somewhere between $4.92 and $6.00 on the standard plans, or between a 40-51% discount off the standard Amazon or iTunes price. Still a substantial discount, but not quite as attractive—more like the Amazon 50 for $5 promotion except all the time.