Peter Kafka

Recent Posts by Peter Kafka

UPDATED: EMusic Gets a New CEO, Promises Cloud-Based Locker Service For 2011


UPDATE: EMusic also says it plans to test a cloud-based “locker” service for its music this year, with a full rollout scheduled for 2011. More details below.

Digital music service eMusic has a new CEO: Digital veteran Adam Klein.

Klein, whose resume includes stops at MTV, EMI and Video Egg, replaces Danny Stein. Stein runs eMusic’s owner, JDS Capital Managment/Dimensional Associates, and has been running eMusic since former CEO David Pakman left for a venture capital gig nearly two years ago. Dimensional, meanwhile, just swallowed up digital distributor The Orchard.

So now that we’ve got that cleared up: What’s the plan at eMusic?

The service is in a weird middle ground between the “buy a song for a buck” model that Apple (AAPL) and Amazon (AMZN) push, and the “$10-a-month for all the streaming music you can eat, wherever you want to eat it” model that Rhapsody, MOG, Rdio and, maybe one day, Spotify are pushing.

Instead, eMusic’s core offering is a $12 a month subscription service–it prefers the term “club”–that gives users up to 24 MP3 downloads a month, which they can keep forever.

For a long time, the service targeted niche music lovers, primarily indie aficionados, but in the past couple of years it has added back catalog from two majors: Warner Music Group (WMG) and Sony (SNE). So users can now download Bob Dylan and Led Zeppelin along with MGMT.

That’s an interesting approach, and there is a business there: There are 375,000 subscribers, down from 400,000 a couple years ago, but still enough to generate some $65 million a year.

But Stein and Klein think they can expand the business again with a redesigned site, set to launch in Q4, that will be more appealing to non-subscribers and give them more incentive to stick around and eventually sign up. We’ll check back in later and see how they’re doing.

UPDATE: I must have fallen asleep right before Stein and Klein told me about their plans to launch a cloud-based “locker” service, which would let users stream their music no matter where they are, in the near future. As it turns out, those plans are still bit fuzzy–or, at least, eMusic isn’t willing to talk about them in great detail. But the gist is:

  • EMusic says it will let users stream music they’ve bought from the service, and possibly other music they own, to PCs as well as mobile handsets like the iPhone and Google’s (GOOG) Android phones.
  • It says it doesn’t believe it will need to pay the labels an additional royalty to be able to do this. I find it hard to believe that the labels will sign off on this, but we’ll see.
  • It isn’t sure whether it will charge eMusic subscribers an additional fee for the service. If it doesn’t, it could be a very expensive marketing tool, as bandwidth and storage for this kind of thing could be pricey if a lot of folks use it.

Here’s some more info, via an “internal Q&A” the company has provided. Obviously, we’ll be following up on this one…

What are your thoughts on a potential cloud-based iTunes from Apple? How will this affect eMusic’s position in the marketplace?

- We agree that customers want to be able to access their music collections from any device, wherever they are. eMusic has a locker system in development, which we’ve been working on since early this year.

When will the locker be available?

- A preliminary version will be available to select members in late 2010, and we’ll roll it out to our full membership in 2011.

Have you talked with your labels about the service yet? What was their reaction? Aren’t the major labels requesting that Apple pay additional costs for streaming from the locker?

- The labels we’ve talked to are interested in supporting this feature on eMusic because of the nature of our membership service. We have a regular, repeat billing relationship with our members, which iTunes doesn’t have and the locker is a compelling feature that will keep customers happy…which ultimately benefits the content owners.

- We are aggressive stewards of copyright and believe that a locker with the functionality we plan to roll out is covered by the safe harbor for such devices provided by the Audio Home Recording Act. Therefore, an additional royalty is not necessary.

Will customers have to pay extra for the locker?

- We haven’t yet determined if we will charge for the locker. It will depend on a variety of factors.

How much storage for music will be available to eMusic members?

- The exact amount is a function of several variables, and is still undetermined.

Will they be able to store all of their music collections in their locker, even music purchased from other services?

- Yes, they will be able to store and stream their eMusic purchases and, potentially, other music that they own.

How will the locker work with eMusic? Will eMusic tracks automatically be placed in the locker when someone makes a purchase on eMusic, or will they need to upload them independently?

- Purchased tracks will automatically be placed in the locker. Members can then stream or download those songs on demand from an internet connection.

What other features will the locker offer? Will the locker include a music player?

- Members will be able to upload and download purchases to the locker and stream music on demand. eMusic Save for Later lists and ratings will be handled by the locker as well.

Will members be able to access the locker through their mobile phone? Which phones will work with the locker?

- We will also launch eMusic locker applications for most smartphones, including iPhone and Android.

Release on Klein’s hire:

eMUSIC APPOINTS VETERAN MEDIA INDUSTRY AND STRATEGY EXPERT
ADAM KLEIN AS PRESIDENT AND CEO

NEW YORK, Aug. 3, 2010 – eMusic, the digital music club, today announced that it has appointed veteran media industry and strategy expert Adam Klein as President and Chief Executive Officer.

Klein has more than 20 years experience leading strategic, operational and organizational change with both established and technology-led media companies. His background includes work as a strategy and change management consultant as lead partner with Booz Allen Hamilton’s media practice, with Boston Consulting Group and his own company, Klein & Co. He also has held executive roles at AskJeeves.com, as president and chief operating officer; Hasbro, Inc., as executive vice president and president of global marketing; VideoEgg, Inc., as president; EMI Music, as executive vice president of strategy and business development, including Digital P&L; MTV Networks, as executive advisor to the chairman and CEO; and South African Broadcasting Corporation, as executive advisor to the CEO. Currently Klein runs his own consultancy, Media Leader LLC, and is an adjunct professor at Columbia University Journalism School.

Klein will succeed current President and CEO Daniel Stein on August 23. Stein will retain his role as eMusic Chairman and continue to be substantially involved with the company as part of its management team. He also remains CEO of Dimensional Associates and President, JDS Capital.

Stein said, “As eMusic continues to grow its business and provide the best online service for people who are passionate about music, Adam’s leadership in digital media and his successful track record as a business builder is custom-made to take on the CEO role. His decision to join eMusic speaks to his high regard for the platform we have worked so hard to create, and we are now poised to take the company to the next level together.”

“What a great opportunity eMusic represents! It is a well-established platform ready for its next chapter of value and service to its members. I am excited to be a part of eMusic’s ongoing evolution,” said Klein.


Latest Video

View all videos »

Search »

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work