Amazon Lowers Prices, eMusic Raises Them
EMUSIC’S PLAN COULD HURT INDIES
UPDATE: Be sure to read the comments section including an eMusic rebuttal and join the discussion.
While retaining 89 to 99 cent pricing on most tracks, Amazon is experimenting with lower prices on short term special album downloads. Taking a page from Wal-Mart’s blue light specials which kept shoppers roaming the store to see where the flashing light would land, on Wednesday morning Amazon MP3’s "Daily Deal" offered a download of Coldplay’s X&Y for $1.99 and Stevie Wonder’s #1’s album at $2.99. "Friday’s Five" will offer five albums at $5 each.
eMusic, on the other hand, announced a price increase. Effective July 17th, eMusic’s monthly Basic Plan will increase $2 for all subscribers from $9.99 to $11.99. UK rates go to 10.99 GBP and EU prices jump to 13.99 Euros. Canadian pricing which was already higher will not change. In a move to keep existing subscribers, they will recieve 40 instead of 30 downloads each month and a one time 10 track thank-you bonus.
ANALYSIS: eMusic’s price increase comes at a time of slowing subscriber growth for the service and could be part of an attempt to boost the balance sheets in preparation for the IPO or sale that its venture capital owners…
have sought for so long.
It is doubtful that many existing subscribers will leave over a $2 increase particularly with a 10 track monthly bonus. It will be interesting to see, however, if jumping 20% above the $9.99 sweet spot will hurt new subscriber growth further.
Either way, once again, eMusic’s move to satisfy customers and clean up the balance sheet comes at the expense of indie record labels and artists. The new pricing effectively lowers per track prices from $33.3 cents to 30 cents for 400,000+ existing subscribers which will probably lead to lower track payouts to labels. And since the one time 10 free track bonus can come from anywhere within eMusic;s catalog, how will the effected artists compensated?
Large indies Epitaph and PIAS showed their concern recently by pulling from eMusic and joining a slowly growing group of labels unhappy with the service’s much lower than industry average payouts.
Amazon, on the other hand, appears to be giving both labels and customers what they want – variable pricing. Offering an older Coldplay and Wonder title at deep discount just as the former launches an album and tour and the later makes a rare EU jaunt can only drive sales of their entire catalogs and music lovers to Amazon to check what’s on sale each day.
I agree that eMusic is trying to make its financial numbers better for potential buyers. However I don’t get the concern over the 10 free downloads and the effect on indie labels; presumably eMusic will just count this as an internal expense and compensate labels as normal.
Also, based on reports in the eMusic message boards it’s not clear that there’s a net outflow of labels from eMusic. Some have left, others have joined, but overall eMusic seems to be offering more tracks in total than in the past.
Overall I think this idea of “eMusic bad (for indies), Amazon good” is a bit simplistic. eMusic is a “bargain basement” service directed at price-sensitive customers who likely would not otherwise be buying particular releases, and labels should use it accordingly, e.g., by delaying release to eMusic until some time after release to iTunes and Amazon.
As for Amazon, I agree with Digital Audio Insider that Amazon’s long-term goal is likely to drive the price of almost all digital releases to the $5 per album range, and over time they quite possibly will have the pricing power to do this, whether indie labels like it or not.
Hi Bruce — The truth is, in most subscription services, the majority of customers are in the company’s basic tier plan. So this move will bring more revenue into the company which will in turn enable us to pay out more to our label partners. And if you analyze the numbers, Amazon’s $5 albums vs. our new Basic plan at $11.99 for 30 tracks, they both net out to about 40 cents a track, give or take a cent. We are two different services that offer consumers two different experiences, but in the end, the market is driving the pricing.
Cathy Halgas Nevins
eMusic
Thanks for the comments.
To Cathy of eMusic: Good points.
I certainly agree that lower prices can drive sales. But I thought the higher per track pricing is only for new subscribers. You actually lowered the price for your 400K regular subscribers. Did you not? And Amazon’s $5 pricing is on select usually older tracks whereas yours is on everything new or old; hit or obscure. Please help me and my readers understand your comparisons.
And can you share with us (and reader Frank above) how eMusic accounts for free tracks and how labels are compensated for them?
I appreciate you joining the conversation and would be willing to post your answers in a new full post.
Bruce: I can’t speak for eMusic, but here is my impression: As I understand it, what eMusic has done is to raise the monthly fee for existing eMusic Basic subscribers (from $9.99 to $11.99), but to also raise the download limit at the same time (from 30 tracks to 40). This is in fact a nominal price decrease (from $0.33 to $0.30 per track), but (and this is the key point) that would affect per-track payouts to labels only if Basic subscribers downloaded their full monthly quota of tracks.
However I suspect that most Basic subscribers do not download their full quota, so the actual eMusic revenue per track is higher than $0.33, and the label payouts reflect this. If this trend continues then the per-track payouts may be unaffected, and may even go up, even for existing subscribers.
For example, if Basic subscribers download on average 20 tracks per month per subscriber (an educated guess on my part), then average revenue per Basic subscriber was previously $0.50 per track ($9.99 divided by 20). If existing subscribers don’t change their downloading behavior very much, then the new average revenue would be $0.60 per track ($11.99 divided by 20), and label payouts would increase correspondingly.
Bruce: I’m pretty certain Epitaph pulled out of the US site in September 2007, almost a year ago – that’s not recently. As for PIAS, I did a search and mogwai and shy child are still up along with a bunch of other stuff that comes through them.
From my findings, eMusic offers a great selection of tracks from thousands of indie labels. My friends and I are all eMusic subscribers and big fans. Personally, I don’t think Amazon is in the same league as far as editorial and community. I’ve always been happy with the service they’ve provided so there’ll be no slowing down downloads for me!
You’re right that eMusic blows Amazon away on content. And I did not mean to compare the two services except that one is lowering as the other raises.
My concerns with eMusic are not as a consumer,(I was once a subscriber.) but payouts to labels and artists and ultimately what that will mean for their business model.