Will the music subscription business ever grow beyond its current niche? It looks increasingly doubtful. Today, eMusic announced that since it launched its current music subscription service in 2003, customers have downloaded 250 million songs. Apple’s iTunes, by comparison, has sold more than 5 billion songs since it opened the iTunes Store in April, 2003. That makes eMusic one twentieth the size of iTunes.
The way eMusic works is you pay a subscription of between $12 and $20 a month and then you can download 30 to 75 songs a month and keep them. You can also purchase songs above those limits, starting at $0.25 a track. eMusic has a catalog of 4.5 million songs, and is particularly strong in independent music. It currently has 400,000 subscribers, and the company expects to make $70 million in revenues this year.
That implies the vast majority of subscribers opt in for the basic $12 a month plan, which would net $57.6 million a year if that is what everyone paid. The difference can be accounted for by those people who opt for the more expensive land and additional downloads. And the best part of the business is that eMusic gets paid a guaranteed minimum no mater how few songs a customer actually downloads
only pays the labels for the songs its customers download. So if someone doesn’t use up their allotment and only downloads 5 songs during a given month, eMusic pockets the money that would have gone to the and the labels pocket the money for the other 25 songs they could have downloaded. [Correction: The labels are not paid on a per song basis, rather they receive 60 percent of eMusic's total subscription and download revenues]
It’s a nice business because eMusic gets rewarded for customer laziness. And iTunes certainly needs competition, so I hope it keeps chugging along. But these numbers don’t bode well for the subscription music business ever rising up to challenge iTunes in any meaningful way.