By Jeremy Wagstaff
from the 14 November 2002 edition of the Far Eastern Economic Review, (c) 2003, Dow Jones & Company, Inc.

Big media’s flirtation with the Internet may be over soon after it began. At least that’s how it looks to a bunch of music enthusiasts who have been subscribing to an on-line service called EMusic (www.EMusic.com), which allows users to download songs in the compressed MP3 format for a flat monthly subscription fee (a princely $10 for most). The four-year-old service was going fine — about 65,000 users, 230,000 tracks available, revenues rising 30% in the first half of the year — until late October when several subscribers were told their accounts had been terminated, due, EMusic said, to “unusually excessive download activity.” In a nutshell, they got bumped because they downloaded more music than EMusic reckoned was fair. One or two have since been reinstated, but most haven’t, leaving a very sour taste in the mouth of EMusic’s once loyal fans.

 

This is all sad, and in my view unnecessary. EMusic has done a wonderful job in bridging the gap between the illegal world of Napster file-sharing and the old world of buying expensive CDs in a shop. But it has shot itself in the foot and raised fears that the entertainment giants behind such sites are no more committed now to distributing music over the Internet than they were pre-Napster.

 

For those of you not in the know, here’s some history: A few years back pimply youths discover MP3, a computer-file format which allows them to convert a CD into a size small enough to send over the Internet. Other youths discover ways to share such files with other users, suddenly making shops and the CD somewhat redundant. Lawyers swoop and Napster, despite being bought out by one of the big media giants, is now a redundant “work in progress” (www.napster.com).

 

Into the gap, among others, leapt EMusic (which started out as GoodNoise), with a sizeable stable of music for easy download. Deciding wisely not to tamper with the MP3 format via security features that may prevent users from doing what they want with the music they buy, the service quickly grew. Last year it was bought by Universal Music Group and later folded into the new Vivendi Universal Net USA Group, Inc., along with other music-oriented sites like www.rollingstone.com and www.MP3.com. So far, so good. EMusic has proved to be an excellent source of interesting, if not mainstream, music from classical to hip hop. In the past month I’ve become a big fan too, dipping into some great ambient and electronic stuff I otherwise would never have found, finally ditching those Dolly Parton records I’ve been listening to for years.

 

However this recent move casts a heavy cloud over the service. EMusic appears caught between the scepticism of its owners and the natural desire of users to make the most of their subscription. Ahead lurk some difficult decisions: Reuters last month quoted sources in Universal as saying a verdict would soon be made on what music Web sites would be sold off and which would be kept, probably as part of some integrated Web site.

 

So what to do? I can quite understand that EMusic wants to protect its assets. EMusic public-relations chief Steve Curry says EMusic must pay royalties to both the music publisher/songwriter — via a flat-rate fee per track downloaded — and to the record label/performer — from what’s left in the pot after EMusic takes its cut. In short, he says, the business model will only work if it doesn’t spend too much on paying the former, leaving none for the latter. If one person downloads a lot of tracks, most of the money will be paid in flat-rate royalties. “That is why we’re very concerned about monitoring and preventing large-scale abuse of our service — to make sure members are keeping it to ‘personal use and enjoyment,’ not ‘I wonder how many tens of thousands of MP3s I can possibly download in a month.'”

 

Fair enough, but EMusic’s own press releases hardly discourage such practice. The most recent states that “EMusic is a revolutionary new music discovery service that allows fans to download as much MP3 music as they desire for as little as $9.99 a month.”

 

What’s unnecessary about this is that every subscriber to EMusic knows they could find the music free on file-sharing services like Grokster (www.grokster.com) and Kazaa (www.kazaa.com). But they choose to obey the law and cough up. To me this is proof positive that most Internet folk are reasonable and law-abiding and want the artists they listen to to get some money for their work. And most would probably be happy to cough up more if it meant EMusic survived.

 

If EMusic survives it’s going to be down to whether its owners reckon it’s going to make money in the long run. If it does make money it’s going to be because its fans continue to sing its praises to others, in turn feeding more subscriptions, and, most importantly, the readiness of artists and labels to contribute their catalogues to the EMusic library. None of this is going to happen if EMusic treats its users like potential shoplifters.

 

EMusic, change your subscription model (there are some excellent suggestions on the newsgroup at http://groups.yahoo.com/ group/emusic-discussion) so that heavy and light users are catered for, but don’t drive away the very people who have helped proselytize your service. Otherwise they’ll slink back to illegal file sharing and I’ll have to root around in the dumpster for my old Dolly Parton records.