Labels pressure eMusic to increase prices

 

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Posted on 9 May 2007 at 09:24

A number of independent record labels are threatening to withdraw their music from the eMusic download store unless it rethinks its pricing model.

According to US industry magazine Billboard, at least six labels plan to either pull their entire repertoire or limit content to back-catalogue recordings.

'We've been partners with eMusic since the very beginning, and it is a great way for our customers to discover music,' the head of one of the labels, who asked not to be identified, told Billboard. 'I hope they can make it a better value proposition for the labels. But if they don't, we are planning on pulling out.'

Currently eMusic subscribers pay around 15p per track - though the exact price varies depending on which package they select. Labels claim that they receive around 6p of that, considerably less than then 30p per track they get from 79p iTunes downloads.

According to Billboard, some labels believe eMusic is keeping prices low to increase its subscriber base and thereby make it a more attractive takeover target.

eMusic CEO David Pakman recently denied that the service was for sale, and he vigorously defends its pricing policy.

'Most of you know about price elasticity,' he said. 'It's the basic economic concept that says, for certain goods, when you raise the price, sales will fall disproportionately, and so the increased revenue doesn't make up for the lack of sales. And if you lower the price, sales will rise disproportionately. Music is an elastic good, and we have now seen that by raising prices, the industry in fact did not make up the revenue, and, in the end, only slowed sales.'

He points out that eMusic users download, on average, 20 songs per month, compared to the iTunes average of 10 songs per year.

'And here's the bottom line: the average customer only spends about $12 per year on iTunes; by contrast, the average eMusic customer spends about $168 per year with us,' he said.

Pakman believes that underpinning the dissatisfaction - which it must be said appears to be confined to a tiny minority of eMusic's 13,000 labels - is the fact that they can no longer set the price that the consumer pays for their music.

'The biggest shock to entertainment companies, in the era of Web 2.0, is that the customer sets the value of the music - not the label or the artist,' he said. 'I'm not saying that music is not worth it - again, I wish it were easier to make a living as a musician. But we are now in the era of "you" - just ask Time magazine... The customer now decides which music is successful and how much they're willing to pay for it. And, the truth is, our customers tell us that 99 cents a song is not the right price for most music - particularly for music that they haven't heard of before.'

Author: Simon Aughton