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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March 22, 2011

The Downside of eMusic's Currency Pricing
by David Harrell
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Even after last year's subscription changes, average album prices at eMusic are no doubt less than the average prices at iTunes, Amazon MP3, and other digital music stores. Yet I believe that eMusic's switch from a credits system to currency pricing, in combination with Amazon MP3's $5 album deals and daily specials, presents a real challenge to eMusic's subscription-based business model.

Here's why: With eMusic's old credit-based system, direct comparisons to prices in other digital stores weren't straightforward. The math certainly wasn't difficult, but "12 credits" was an entirely different animal than "$5.99," which is now the default eMusic price for many new releases. Your credit card was charged every 30 days, credits showed up in your account, and you used them to download albums and tracks. Any price considerations you made were likely based on the number of credits required for an individual album -- that is, based on the number of tracks and credits required, was it relatively expensive or a relative bargain? You might have done the math to figure out the dollar amount for either extreme, but in general, you were probably more likely to think in credits than in dollars and cents.

Now, you see the price of each album spelled in dollars and cents, which has a two-fold effect: 1. It reminds you again of what you're actually paying for the album (something you were less likely to think about under the credit system), and 2. It invites direct price comparisons with other digital stores, namely the daily specials and $5 album deals at Amazon MP3. (It's slightly more complicated than that, because some existing subscribers received monthly bonuses when currency pricing was implemented. For example, I currently pay $11.99 every 30 days, but my account is credited with $13.99, making my true cost of a $5.99 album just $5.13.)

Chances are, the price of any individual album is still less at eMusic than at Amazon MP3. Yet when you think about how a subscription actually works, the eMusic advantage become less apparent. That's because no one is ever buying the entire eMusic catalog. With an $11.99 eMusic subscription, you can download approximately two albums every 30 days. You have tens of thousands of albums to choose from, but you have to decide on two to download. (We'll get to individual track downloads in a minute.)

At Amazon MP3, the total catalog is the same size, if not larger, but your bargain pool of $5 monthly specials (as well as whatever shows up as the daily deal, which is most frequently priced at $3.99) is a relatively small one. Yet as long as you can find just two albums you'd like to each month for $5 a piece, you can probably equal your total eMusic album downloads for a lower price. And you're not locked into an ongoing subscription where, if you lose track of the expiration date, you can lose most of the money you paid for the most-recent period.

I've heard from at least two friends that the $5 Amazon specials are making them re-think their eMusic subscriptions. Granted, that's a tiny sample size, and perhaps it's an anomaly, but I can't help wondering if a larger number of eMusic subscribers (and potential subscribers) are thinking the same way. Over at eMusic's message board, subscribers will often point out the availability of albums for less at Amazon MP3 or other stores.

The switch to currency pricing was made, of course, to accommodate variable track/album pricing within the eMusic catalog. Another option would have been to allow fractional pricing -- charging one credit for some tracks and one-and-a-half for others -- but that approach just seems messy. Another possibility would've have been to "deflate" the credits. That is, give more credits for each subscription price point, say 100 for $11.99 instead of 30, and then charge more credits for each track -- some songs would be two credits, some would be three, and so on. My guess is that eMusic considered these options and others, and decided that straight currency pricing, if not an ideal solution, was its best option.

For myself, the bargain appeal of eMusic is more now obvious for individual songs than with full albums, at least for new releases. Individual tracks are priced at 49 cents, 79 cents, or 89 cents. With my $2 bonus each 30 days, that makes my cost for individual track 42, 68, or 76 cents, prices you won't find at Amazon MP3 or iTunes, where prices for individual songs top out at $1.29.


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