EMusic nears major label deals for fall relaunch

NEW YORK (Reuters) - eMusic, the subscription digital music service, is close to wrapping up deals with the last two major labels in time for a planned relaunch in November, its chief executive said on Tuesday in an interview.

The 12-year old start-up is working on deals with Vivendi’s Universal Music Group and EMI Group in the coming weeks, a move that would expand its library of music to about 17 million songs -- up from 10 million now.

eMusic, which made its name by winning over fans with songs and albums from thousands of independent labels, signed its first licensing deals with two of the four majors in the last year with Sony Music and then Warner Music Group.

eMusic CEO Adam Klein, who joined as chief executive last month, said the company is moving away from its previous promotional-led ‘free songs’ strategy that relied on music fans becoming paying club members.

A former EMI and MTV executive, Klein said while eMusic would retain its club membership model, it will have a more ‘open site’ without the need for credit card registration before being able to browse the availability of songs.

The site’s relaunch will be supported by a major marketing campaign as it tries to reverse a slow decline in membership and compete more effectively with dominant market leader, Apple’s iTunes store and No.2’s MP3 store.

eMusic now has around 375,000 members and expects to bring in around $65 million in revenue this year. eMusic said in Sept 2008 it had around 400,000 users.

Unlike iTunes, where users usually buy songs for around 99 cents each, eMusic members pay a subscription fee of around $12 a month through which they can buy 24 songs.


Klein said the company would also like to launch a digital ‘locker service’ that would allow subscribers to listen to songs they have bought wherever they are and through whatever device they use.

“Our users are saying you own it so you should be able to listen to it wherever you are,” he said. “We’re deep in conversations with the labels about licensing for that.”

Klein said eMusic does not compete with free streaming radio-style services like Spotify and Pandora that have grown in popularity in the last couple of years as users get more used to streaming music services.

“We’re not in the commodity business of music, We’re in the business of adding value,” he said.

Despite eMusic’s pedigree, it faces increasing competition from Google and Sony, which are reported to be planning digital music services to rival iTunes. Apple is also expected to ramp up the iTunes service with a streaming service after buying LaLa late last year.

eMusic is owned by Dimensional Associates, a private equity arm of JDS Capital Management, which was reported at the start of the year to be considering exit options as competition in the digital music market tightened up.

Klein declined to comment on the Dimensional’s options for eMusic.

Reporting by Yinka Adegoke, editing by Leslie Gevirtz