May 24, 2024

Media Decoder: An Indie Music Retailer Embraces the Mainstream

It’s the challenge faced by every indie band that ventures up to the big leagues: can it stay cool — and independent — once it goes into business with the major record labels?

The music of Thom Yorke of Radiohead was added to eMusic's offerings this week, part of a catalog of 15,000 albums from the record label EMI.John Shearer/Getty ImagesThe music of Thom Yorke of Radiohead was added to eMusic’s offerings this week, part of a catalog of 15,000 albums from the record label EMI.

That is also the situation faced by eMusic, which has long maintained an identity as the alternative digital retailer, with vast offerings of independent music and low prices. But that identity and the loyalty of its 400,000 paying subscribers came into question two years ago when it began adding the catalogs of the major labels and raising its prices.

The service began the last phase of its integration of the major label catalogs on Thursday when it added 15,000 albums on EMI, including some by Radiohead, Coldplay and Brian Eno and the Blue Note jazz catalog.

Yet according to Adam Klein, its chief executive, eMusic has stayed strong and stuck to its indie roots by serving a niche clientele with sophisticated tastes and a tendency to buy more music than the average pop consumer.

“Everyone wanted to see if we were going to become a puppet for pop-culture music,” Mr. Klein said. “We said we never would, and we will continue to service this segment of the market, which is a very sizable segment of music connoisseurs.”

One EMI jewel that will not be on eMusic just yet: the Beatles. Apple has exclusive rights to sell the digital music of the Beatles, but EMI would not say how long that exclusive deal will last. (One consolation to fans: eMusic will carry the Beatles members’ solo albums.)

EMusic began in 1998 and was indie-friendly from the start, partly out of necessity. The big labels did not license their music to the service because its prices were low and it did not use digital rights management, or D.R.M., the copy-protection systems ubiquitous at iTunes and most other digital retailers.

That began to change in 2007 when Amazon introduced its D.R.M.-free MP3 store; iTunes followed two years later, and in June 2009, eMusic began to add music from Sony Music Entertainment. The Warner Music Group and Universal Music Group followed in 2010.

Unlike iTunes or Amazon, which sell songs à la carte, eMusic offers downloads through subscription, with a variety of payment plans. Before its deals with the majors, the highest-tier customers paid less than 25 cents a download; after eMusic added Universal’s catalog last fall and changed its pricing structure, most songs cost 49 or 79 cents.

EMusic, which is owned by Dimensional Associates, an arm of the hedge fund JDS Capital Management, faced reaction from some customers, who saw its pricing changes as a capitulation to the majors. And three prominent independent labels, the Beggars Group, Domino and Merge Records — which release music by indie giants like Vampire Weekend and Arcade Fire — withdrew their catalogs, complaining about changes in contract terms.

But Mr. Klein said that the damage had been minimal. He said that the churn, or turnover rate of new customers, had decreased by 14.1 percent from last year, and in the last six months, the average revenue per user had increased 22 percent. EMusic does not release its subscription numbers, but they are widely estimated in the industry to be about 400,000.

Analysts credit the service’s depth of editorial coverage through reviews and genre guides — it has six full-time editors and about 140 contributing writers — and its promotion of under-the-radar music in helping it to attract and retain customers. Mike McGuire, a media analyst at Gartner, likens eMusic to a boutique record store that knows how to service a small but devoted niche, compared with the mainstream clientele of big box online stores like Amazon or iTunes.

“They’ve managed to leverage what every good boutique does, which is know their customer,” Mr. McGuire said of eMusic.

Mr. Klein, a former label executive who took over at eMusic last summer, said that a market study he commissioned from the Insight Research Group showed that it had a large yet discerning potential customer base. According to the study, which polled eMusic’s customers as well as other online music users, only 7 percent “love most of the most popular songs on the radio,” and 95 percent are always seeking out new music.

The size of this potential audience, according to the study, is around 30 million. In addition, Mr. Klein said, 75 percent of eMusic’s users tend to download full albums, while single-track downloads dominate the sales at the big digital outlets.

This summer eMusic will begin introducing features to attract new users and keep pace with changes in the digital marketplace, including the ability to listen to songs on any device through the cloud. Google and Amazon recently introduced cloud music services — which stream music over the Internet, reducing the need for storage on personal computers — and Apple is expected to release its own variation soon.

But Mr. Klein said that the future of eMusic, like its past, is in pursuing not the fickle mainstream but the passionate fringe.

“We’re not looking to be competing with the major mass market players out there,” he said. “We seek to service this community, and it’s a very sizable, very creative, very artistic community. We’re probably the strongest player with that group, and we have only a small percentage of it, so our growth possibilities are very exciting.”

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