UPDATE: Re: > 20 billion music tracks downloaded illegally in the last year
saw this link on "techdirt.com", it came from
http://www.usatoday.com/tech/products/services/2006-07-30-emusic_x.htm?csp=34
LOS ANGELES — The smash success of Apple's iPod is paying huge dividends for a less-well-known music industry player, online retailer eMusic.
Apple has sold nearly 60 million iPods since 2001, and music fans regularly frequent the company's iTunes online store to buy songs for their iPods — giving iTunes a nearly 70% share of the music-download market.
Rivals Napster, Rhapsody, Yahoo Music and others compete with similar online offerings. Their songs don't play easily on iPods, however, hindering their growth.
Then there's eMusic and its more than 1 million songs, which do play on iPods — and the company isn't shy about letting customers know. "Get 25 free iPod-compatible downloads just for trying us out," eMusic says in its current TV ad.
Like Napster and Rhapsody, eMusic is a subscription service. Unlike those of its competitors, eMusic customers fully own the songs after downloading, with no restrictions. How does it do that? EMusic's songs are unprotected MP3s, which means they play on any device. Rivals sell copy-protected songs aimed at preventing unauthorized trading on file-sharing networks.
EMusic's supplying labels don't worry about such trading because eMusic users tend to be older, sophisticated music fans who are less likely to engage in online song-swapping.
Napster, Rhapsody and Yahoo have deals with the four major labels to sell the big hits. EMusic does not. It sells only independent label music, which it says is more popular than most people think. It cites statistics from the American Association of Independent Music that independents' market share of CD sales is 28%.
EMusic believes that copy-protecting files hinders sales, and that view is shared among many in the industry. Yahoo Music, for one, recently persuaded major label Sony/BMG to let it sell a song by pop diva Jessica Simpson without copy protection, as a test.
Getting feedback
Consumers are responding: EMusic has quietly climbed into second place to iTunes, albeit with an 11% market share to iTunes' 67%, according to market tracker the NPD Group. The company sells monthly subscriptions, and those numbers have doubled since December, to 200,000. The company averages downloads of 5 million songs monthly.
"There's no question the iPod success has worked in our favor," says David Pakman, eMusic's 37-year-old CEO. "The consumer confusion over interoperable formats gives us a great advantage."
That eMusic has found any traction is surprising, as it doesn't have any big hits. No music from major labels means nothing from chart-toppers such as Shakira, Beyoncé or U2 — but plenty from Scott H. Biram, the Pipettes, Dashboard Confessional and Peaches.
They are some of the popular eMusic artists, a roster that also includes household names: Johnny Cash, Ray Charles, Credence Clearwater Revival, Miles Davis, Van Morrison, Moby, the White Stripes and Diana Krall are a few of the independent label notables, in a roster more heavily weighted to jazz, classical and indie rock than pop.
Daniel Raymont, a 37-year-old New York actor, is a heavy subscriber who pays $19.95 to download 90 songs monthly.
"For the curious-minded music shopper, iTunes isn't very helpful," he says. "This is a service for music junkies with wide-ranging tastes."
EMusic's origins pre-date iTunes'. EMusic was one of the first legitimate online digital music retailers. It always specialized in independent music. Before Pakman arrived, the firm offered unlimited downloads for a monthly fee. When Pakman's Dimensional Associates — he's a partner in the firm — bought eMusic from Vivendi Universal in 2003 for an undisclosed price, Pakman decided that business model had to go and changed the structure. Subscriptions now start at $9.95 for 40 downloads monthly.
The company has 75 employees, mostly in New York, and will turn a profit next year, Pakman says.
"David took a catalog that wasn't the strongest in the world, but with effective marketing, motivated consumers to pay," says Ted Cohen, a former executive with EMI Music who now runs the TAG Strategic consultancy. "He's created a great environment for finding new music."
Classical music label Naxos North America is eMusic's biggest seller. "ITunes exists to sell hardware," says Naxos CEO Jim Sturgeon. "EMusic is about selling music. Their primary concern is to sell content, and that's why they do so well. It's like an independent record store vs. a Wal-Mart."
Naxos, which also sells music on iTunes, has no qualms about offering material without copy-protection, or digital rights management (DRM), as it's called in the industry.
"The majors have caused themselves nothing but grief with DRM," says Sturgeon. "What are they protecting? Any kid can figure out how to get around it. What they are really saying is, 'I don't trust my consumer.' "
Gene Rumsey, general manager of Concord Music Group, which released Ray Charles' chart-topping 3 million-selling Genius Loves Company album and owns the historic Fantasy, Milestone and Riverside jazz labels, supports eMusic's no-DRM strategy because he says eMusic fans are not the typical college-age file sharers. They are more rabid fans who he believes are less likely to engage in online song swapping. On the other hand, if iTunes and the others dropped DRM tomorrow, "I don't think anybody would make money selling music," he says. "It would all end up on the file-sharing services."
'Dramatic' results
Pakman spends many hours trying to convince the majors otherwise. He has a juicy pitch: Give him out-of-print material that consumers can't get their hands on and let him promote the material heavily on eMusic, minus DRM.
"The results would be dramatic," says Bob Frank, who runs indie label Koch Records. "EMusic would market the hell out of those songs."
The proposal has been accepted at all the major labels by lower-level digital executives, but gets stuck when it goes up to the executive suite, Pakman says.
It's a fun idea to consider, he says, but he assumes it will never happen. "There are too many political hurdles to jump through at the labels," he says. "We've built a business based on independent music, and we're very bullish on the future."
