Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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November 06, 2006

Welcome to the Club
by David Harrell

Welcome to the Club
Evidently, eMusic's revenue-sharing agreement is more complex than I thought. In an early post for this blog, I wrote that music subscriptions are like health clubs, where infrequent-users essentially subsidize those members who take full advantage of their subscriptions. However, I later exempted eMusic from this characterization, believing that its revenue-sharing model made it indifferent to the number of downloads each subscriber used each month. I believed it was simply passing on a straight percentage of the subscription fees to record labels, divvied up according to the total number of downloads each month.

But I was wrong. According to this Register story, eMusic's David Pakman acknowledges that "health club" economics do play a role in the company's business model.

So eMusic will see a direct financial benefit from decreasing the number of downloads for each subscription plan. And there are two other ways that the new rate plan might benefit the bottom line. First, it might encourage some current subscribers to upgrade their plan before the changes take effect, to lock into the current rates.

The second benefit is less direct, but in theory, the per-download payments to artists and labels should increase. Which could, as one subscriber speculated on the eMusic message boards, encourage additional labels to make their catalogs available to eMusic subscribers.

However, any changes in per-song payments from eMusic will probably phase in very slowly. Even after the new rates take effect, the vast majority of eMusic subscribers (the current base) will be paying the old rates. I have no knowledge of the specifics of the revenue sharing agreement, but based simply on the changes in the number of downloads, the plan frees up 33% more for labels for the $9.99 plan, 30% for the $14.99 plan, and 20% for the $19.99 plan. Yet to pass on even half of those percentages to labels, eMusic will have to sign up the same number of subscribers under the new plans as it currently has under the old rates, essentially doubling its subscription base.

We don't receive monthly payments from CD Baby from our eMusic sales (they seem to get lumped together for several months) but I'll post any new numbers as soon as I see them.

related: A Price Increase for eMusic, Why Music Subscriptions Are Like Health Clubs, Increased Downloads at eMusic, Per-Song Label/Artist Payout Decreases

tags: eMusic digital downloads digital music

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THE LAYAWAYS

Out Now -- "Maybe Next Year" -- The New Holiday Album:

"This is a sweet treat, deliciously musical without being overbaked for mass media consumption." -- Hyperbolium

"Perfect listening to accompany whatever holiday preparations you may be making today." -- Bag of Songs

O Christmas Tree - free mp3 lyrics and song details
Away In A Manger - free mp3

Download from eMusic, iTunes, Amazon MP3, or Bandcamp. Listen to free streams at Last.fm.

"...about as melodic and hooky as indie pop can get." -- Absolute Powerpop

"Their laid-back, '60s era sounds are absolutely delightening." -- 3hive

"...melodic, garage-influenced shoegaze." -- RCRD LBL

Where The Conversation Ends - free mp3
January - free mp3
Keep It To Yourself - free mp3

Download from eMusic, iTunes, Amazon MP3, or CD Baby, stream it at Last.fm or Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"Catchy Guided by Voices-like rockers who lay it on sweetly and sincerely, just like Lionel Richie." -- WRUV Radio

Silence - free mp3 lyrics and song details
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, stream it at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

the layaways website