eMusic Payments Don't Rise Despite Price Increase

Kenny

http://www.hypebot.com/hypebot/2010/01/emusic-payments-dont-rise-despite-price-increase.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A%20typepad%2FDqMf%20%28hypebot%29

Thoughts?


The article:

The first full-quarter label/artist payout from eMusic after the introduction of the Sony catalog (and the restructuring of its subscription plans) was just about the same as the one for the previous quarter: for the third quarter of 2009, we received 34.2 cents for individual song downloads, a modest increase from the 33.4 cent payout for the second quarter.

Given that eMusic raised its prices (by lowering the number of downloads subscribers receive) there was some speculation that the new rates would lead to significantly increased payouts to labels/artists. Though eMusic stated that introduction of the Sony back catalog wasn't the sole reason for changing its subscription plans, it seems likely that the Sony addition played a huge role in the decision.
The business model eMusic is less straightforward than those of the other digital music stores/services. Rather than paying a set wholesale price for digital songs, eMusic has a revenue sharing agreement, where -- after certain expenses and deductions -- 60% of its subscriber income is passed on to the labels in its catalog. How that 60% translates into a per-track amount is dependent on the download activity of eMusic subscribers: When subscribers don't use all of their allotted downloads, the per-track amount is higher. This "digital breakage" has kept the per-track amount high, relative to the nominal per-track rates built into the subscription prices. Indeed, there have been times when the per-song download payout for my own music in the eMusic catalog has exceeded the per-song amount I pay for my monthly subscription.


Back in June, I speculated that the reason for change in the subscription plans might have been to preserve the current payout levels, as opposed to significantly increasing them. If -- after the Sony material was added to the catalog -- subscribers became less likely to let their downloads expire, then the previous per-song payouts would have decreased.

Based on the payout for the third quarter, it appears that the overall digital breakage by eMusic subscribers has declined -- if it had remained the same, it seems likely that the increase in the per-track payout would have been much larger. However, because the overhaul of the subscription plans coincided with the introduction of the Sony material, it's tough to say if that decrease was because of the availability of the Sony catalog, or the fact that with fewer downloads, subscribers were simply more likely to use them all. (Maybe it's a combination of the two factors.)

There was one other change in the payouts we received: While in all previous quarters, CD Baby just reported the total number of downloads per each individual track, for the third quarter, downloads were reported as single songs or full albums. Perhaps this change was due to eMusic's introduction of "album pricing." Only two of our albums were downloaded in full. The payout for the 10-track album was reported, before CD Baby's 9% commission, as $3.42, which is 10X the per-song rate for the individual song downloads. Yet our 12-track album paid out at $3.76, which works out to slightly less, 31.3 cents, on a per-track basis. If anyone from eMusic or CD Baby is reading and can provide any insight, please leave a comment or shoot me an e-mail.

Bad Thoughts

Not surprising, though it says nothing about the volume of sales at eMusic or the overall payout to labels. The non-majors may feel satisfied with a small decline in payouts to them if flight from eMu leads to spending on their products at other venues. What really hasn't been answered, though, is if Sony has taken a large percentage of the payouts.

Daniel, Esq.

Thoughts?

My thought is that the blog author sounds like he started with an anti-eMusic agenda.

mommio

Daniel, I didn't get that impression at all. I interpreted it as the hope that the payout would be larger, but it didn't turn out to be as large as hoped.

Kenny

Whether or not he has an anti-eMusic agenda, it seems to be the truth. And a strange truth. It's been reported at various sites:

http://www.techdirt.com/articles/20100104/1724447606.shtml
http://www.billboard.biz/bbbiz/content_display/industry/e3ib86e0c8a1b7d91d3fda0acb2e42d0ea3

It seems reasonable that the rise in prices would lead to artists getting paid more. If they're not, that's strange.

Daniel, Esq.

I don't agree that it's so obvious. The top-level blog post is full of vitrol (THE PAYOUTS WERE SUPPOSED TO GET BIGGER!), all of which, it is clear to me, is designed to bolster the author's preexisting gripes against eMusic's recent changes. But the support for that entire post is all based on an underlying -- and far more nuanced -- Hyperbot blog post. That Hyperbot post is (a) based on the anecdotal experience of only one artist and (b) the artist doesn't rail against eMusic. Far from it; the author of the Hyperbot blog post says that it was always his impression that the price-hike was really intended to prevent the deterioration of payouts to artists (rather than dramatically increase payouts to artists). The Hyperbot post paints a far more complicated and evenhanded picture, but you won't get that from the initial blog post.

Kenny

Uh, the Hypebot post is the original post in this thread. I'm confused. It seems pretty even-handed to me. It doesn't seem to have an anti-eMusic agenda.

Daniel, Esq.

Yikes! Kenny (and Mommio), you are right. It's my mistake.

I assumed, foolishly and hastily, that the top blog post was the same one just posted over on the eMusic Message Boards (from something called the techdirt site). That's the blog post I was referring to.

The Hyperbot post is evenhanded. I just don't think it leads to any obvious conclusions.

Nereffid

The idea that "digital breakage" has declined makes sense to me.
To quote the Billboard article: "But if breakage is lower, more songs will be downloaded and the per-song payout will drop as a result. Perhaps the Sony catalog gives subscribers easier, familiar options for redeeming their monthly allotments (by reducing the paradox of choice problem). Or perhaps subscribers are more likely to use a greater percentage of their allotments when they have fewer downloads. Either way, the effects of higher prices and fewer downloads have appeared to have cancelled out one another".

Brighternow

the effects of higher prices and fewer downloads have appeared to have cancelled out one another

- Maybe this is why there's been no Sony drop or price structure change in Europe yet ? - Because it's simply "bad for the Business"

As far as I recall, Robert from Bis wrote somewhere that he expected that the album pricing for Bis releases would start in January.
This does'nt seem to be happening just yet.

Bad Thoughts

As much as digital breakage may be down, the post says little about the effects of album pricing. The musician/blogger is not really in a position to say anything, because his volume is low and he only has short albums available. Many subscribers have probably tried extending their reduced downloads by concentrating on albums with high tracks numbers. Such downloads read as album downloads, but payout as 12 credits. By comparison, album pricing offers less potential profit than under the old system. Using the musician's numbers, tracks from a 20-track album would decline in payout by 2.1 cents. This would be compounded with the possibility that more credits would be chasing album downloads.