Amazon, eMusic Buyout Discussions Unsuccessful, Sources

Acquisition discussions between Amazon and eMusic have now fizzled, according to sources close to the negotiations.

The result follows heavy speculation that Amazon would purchase eMusic, and use the MP3-based destination as its entry into the digital music market.  But during conversations with Digital Music News, insiders pointed to a lapsed exclusivity window between the pair, and a no-deal result.  “There were talks, but no deal was consummated,” one executive relayed.  Additionally, the sources were quick to quash rumors of changes at eMusic parent company, Dimensional Associates, LLC, noting that the group is not seeking outside funds and remains committed to its eMusic property.  In a conversation Monday morning, an eMusic representative was unable to confirm the information to Digital Music News, citing confidentiality agreements.  But the representative did point to continued revenue and subscriber growth, and expressed optimism following a move away from DRM-protected downloads by major label EMI.

The result raises more questions than answers about the Amazon digital music strategy.  Speculation has swirled around a possible Amazon entrance for years, though nothing concrete has materialized.  One executive noted that the retailer would love to enter the market ahead of the holidays, though a launch strategy remains tricky.  Aside from EMI, major labels are still brokering in protected content, a landscape that prevents access to the all-important iPod.  Theoretically, an eMusic purchase would solve the DRM issue by offering largely independent content, while positioning a platform to accept future, non-protected major label catalog as the market evolves.  Earlier, the group sought alliances with hardware manufacturers, though according to one source, Amazon simply “couldn’t make the numbers work with anyone”.  Another was more critical, and outlined an uneven, “stop and start” push by the mega-etailer.  “They are unsure of their plans, and very confused,” the source noted.