Under Pressure, eMusic Chief Defends Pricing Structures

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In response to aggressive download pricing options, a number of labels are now exiting eMusic.

At root is a per-track price tag that now theoretically bottoms at 25 cents, and sometimes lower, depending on the specific package and usage level.  The mini-rebellion, potentially sparked by the exit of Victory Records in April, raises deeper questions about the valuation of a download – and how low retailers, labels, and artists are willing to go.  Defending the broader subscription-based download packages on Tuesday, eMusic chief executive David Pakman referenced broader industry trends and consumer behavioral patterns.  “The customer now decides which music is successful and how much they’re willing to pay for it,” Pakman blogged.  “And, the truth is, our customers tell us that 99 cents a song is not the right price for most music — particularly for music that they haven’t heard of before.”

Pakman also pointed to a distracted and dwindling music consumer.  “According to data we analyzed from the RIAA and Ipsos, last year, more than 30 percent fewer people bought music than did in 2000,” Pakman noted.  “Many have offered theories to explain it — piracy, music quality, you name it — but informed people will tell you that a very big reason is that consumers, inundated with well-priced entertainment choices, think most music is too expensive.”  Indeed, the supersaturated consumer of 2007 is gorging on free music options, comparably-priced DVDs, and all-consuming gaming experiences.  Pakman also discussed levels of price elasticity, which describes the amount of consumers likely to make a purchase as price points change.  “Music is an elastic good, and we have now seen that by raising prices, the industry in fact did not make up the revenue, and, in the end, only slowed sales,” Pakman said.

Story by news analyst Alexandra Osorio.