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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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February 19, 2010

Why eMusic is Like Costco
by David Harrell
eMusic banner

I've written frequently about the health club component to eMusic's business model. For subscribers, there's the "use it or lose it" aspect--you pay for your downloads each month or quarter, whether or not you actually use them. For labels and artists, subscriber activity directly affects the per-download payout amount they receive. Because eMusic shares a set percentage of its subscriber revenue with labels, subscribers who don't use all of their allotted downloads help boost the subsequent per-track payout amount.

But there's another club comparison that seems appropriate: For music consumers, eMusic is also something of a warehouse club. That is, in exchange for buying in bulk, eMusic offers individual tracks at a per-unit cost that is less than the standard prices at iTunes and Amazon MP3, which range from 79 cents to $1.29 a track. And though the eMusic catalog has expanded in the past year to include content from Sony and the Warner Music Group, as with the warehouse clubs, the total selection is less than that available from standard retailers.

In addition, while the average track price at eMusic is less than the single-track prices at iTunes and Amazon MP3, you can often find better album prices at those digital stores, just as the sale prices at your local supermarket might undercut the warehouse club price. (I missed out on Amazon MP3's one-day special price of $3.99 for the new Spoon release and paid a higher price for it when I used 11 of my eMusic downloads for the album.) There's also the occasional release where eMusic doesn't offer "album pricing" and the required number of downloads results in an eMusic price that exceeds the iTunes or Amazon MP3 price, as well as the cost of the physical version. As is the case with Paul McCartney's Good Evening New York City album, as one eMusic subscriber observes:
2 CD set + DVD costs 13.99 on Amazon, or just downloading the MP3 costs 9.49. My emusic plan is 35 downloads for it costs more to download the tracks here than to buy the actual discs, rip them myself, keep the cd as backup and in addition have the DVD?
This warehouse club comparison is probably something to keep in mind when considering how eMusic competes with iTunes and other digital music stores. Few -- if any -- consumers shop exclusively at warehouse clubs. Though the discount pricing is nice, you'll still need to go other retailers to find specific items. And while an eMusic subscription is a relatively small expenditure, it's also more than some music consumers are willing to spend month in and month out. But for those who regularly purchase digital music, it can make sense to buy some of it in bulk. Rather than convincing these consumers to reject iTunes and the other stores, eMusic needs to make the case for joining the club to receive bulk-rate prices, albeit for a more-limited selection.

related: Sony and eMusic: Why the Per-Track Label Payout Might Not Change, Why Music Subscriptions Are Like Health Clubs, Welcome to the Club


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