eMusic economics

hypebot does the numbers on eMusic:

eMusic collects 30 or 40 cents per track downloaded. Because some subscribers don’t download their monthly allotment, eMusic pays 30-35 cents per download. From that 35 cents most labels pay 10-20% to a distributor. Using 15%, that means the distributor pays that label 29.75 cents per track. The current statutory rate that songwriters receive is .091 cents per song, leaving just over 20 cents to be divided between the label and artist. That’s less than half the net payout from a similar iTunes transaction.

I’m glad to see him throw down the gauntlet and finally say what he has against eMusic. And I think he’s speaking for much of the recording industry, so this counts for a lot. Just saying what you really think helps us to move forward.

So here’s what I really think: if you don’t mention volume, price is meaningless.

I’ve been an eMusic subscriber for about five years now, though with a break of a year or so. During that time I have forked over $15 a month every single month. Also during that time I have bought about twenty songs on the iTunes music store.

I use most of my monthly allotment at eMusic, meaning that my money does get passed through to the labels and musicians. Four years of being a subscriber times 60 downloads a month times 20 cents a download = $576.

Out of my twenty songs on the iTunes music store about 70 cents (liberal back of the napkin estimate) went to the labels and musicians. 70 cents a download times 20 songs = $14.

$14 earned, but a higher per-piece rate. Or $576 earned at a lower per-piece rate. That just doesn’t make sense.

But here’s a commenter on hypebot with a more precise view on the economics of eMusic, one which uses staggered release dates to get a higher price from more-passionate buyers:

I’m sure that a lot of labels’ thinking is that if they aren’t on eMusic, then the demand for their catalogue will be greater on other sites where they are getting paid more per download. Therefore, people who are downloading will go elsewhere to get an album and the label will get more money. If a label gets, say, 30 cents/song on eMusic, they have to sell an entire album on eMusic to compete with selling 4 or 5 songs on iTunes. Sure, they may technically sell MORE songs on eMusic compared to iTunes… but they still want that “per track” number that iTunes offers. This is why you see a lot of new releases showing up on eMusic several months after release date. They want to capitalize on the demand for the album on higher paying services. It’s not a dumb move.

Now this is effective economics! They’re segmenting the market to accomplish price discrimination. People who are willing to pay more get earlier access to a release, and needing earlier access strongly suggests that you’re willing to pay more.