EMUSIC’S THE APPLE OF ADAM’S EYE
Last August, Adam Klein was named eMusic President and CEO, replacing outgoing CEO Daniel Stein, who took over the job after former CEO David Pakman left to join venture capital firm Venrock on Oct. 2008.
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 Klein & Co. He’s also held executive roles at AskJeeves.com, Hasbro, VideoEgg, EMI Music, MTV Networks and South African Broadcasting Corporation. Currently, Klein runs his own consultancy, Media Leader LLC, and is an adjunct professor at Columbia University Journalism School. With all those credits, you'd think he knew better than to open up to HITS' own digital dullard, Roy "Vaikin" Trakin.
With Sony, Warner and Universal product all now available on the site, it marks a new phase in eMusic’s development. How do these deals affect your relationship with the indie labels?
It doesn’t mean we’re no longer indie-friendly. The clear reality for us was we couldn’t grow the company beyond a certain level with the product from only independent labels. Around 18 months ago, the investors made a decision to either sell the company or grow it. To do that, we had to go out and negotiate with the major labels to bring them in. There was a very large percentage of consumers, almost 70%, who came to the site to search for artists they couldn’t find, and ended up going away. About a year ago, we began the first phase of that expansion, bringing in Sony, then Warner for all their catalog 18 months or older. Then, about six weeks ago, we added frontline product for both, as well as Universal catalog, with a monthly allocation of their frontline content. We are currently very deep in negotiations with EMI, and hope to finalize an announcement of an agreement with them shortly.
There was some blowback to those moves when Merge, Beggars Banquet and Domino pulled their catalogs from the site, citing the terms has changed.
We were really disappointed they left and we sincerely hope they return soon. We feel we’ve done more with them than any other site in the digital music space, including our editorial, promotions and special offers. Every single label, indie and major, are being treated exactly alike. These moves actually represent a significant potential increase in revenue on a per-track and per-album type basis for the indies. They were concerned, after we brought in major label product, about being a smaller percentage of our marketshare, which would, in the short term, affect their participating in our overall revenue pool. Which is probably true, but as the total pool grows, they’d be back to where they are, and ahead of where they’ve been, in terms of the value of their content. We are intent on servicing all of our clients, major and indie, the best way we know how, firing on all our cylinders. The indie-major distinction is a bit of an obfuscation anyway. We will continue to promote those indie acts through our editorial coverage and the site’s look and feel.
How can you compete against the
We don’t compete with them. That’s not our business. We are a niche player in the market that serves that part of the public for whom music is very important in their lives, spending a couple of hundred dollars plus every year on purchases. We position ourselves as an authoritative voice on music. Of the music our members buy from us, 75% is in the form of full albums. These are consumers who are deeply knowledgeable and looking to learn more, extended in their experience through editorial input and curation.
So you’re Amoeba as opposed to Best Buy, the hip indie retailer as opposed to a mass marketer.
We are the specialty music store that targets people who really want to know and crow about music. Since we are still a club with a paying membership, we have a very attractive price advantage, anywhere from 20-50% below what the major digital retailers charge. We are intent on building attractive packages around our members’ needs and interests as real music fans.
You are removing the pay wall from eMusic, allowing anyone to browse without giving any credit card information.
That represents a big change in our business model. We just rolled that out in order for us to test, experiment and improve, so by early next year, it will be the dominant experience as to how we acquire new members. We’ve put in an interactive experience to allow us to know, quickly, who you are, what your interests are, and what eMusic represents to you. The other big change is not necessarily offering free tracks as an incentive, to eliminate those who are just trolling the Internet to take advantage of that and then move on. It’s not a good business model. If you’re going to be a niche player, you have to identify that niche, understand who your customer is and super-serve them the way nobody else does. And that’s our business model moving forward.
You also just announced a new guerilla marketing campaign, “Road Show,” to spread the eMusic brand.
It’s just a small part, but a fun one, in our overall marketing push. We’re starting a two-year brand-building campaign which includes ads in music publications, including Rolling Stone. We just want to have some fun with this, create a little bit of street buzz. It’s a neat way to present ourselves with a different face out there. It all leverages from the fact we know a huge amount about music. We are incredibly thoughtful in the way we curate and put stuff together on the site, helping knowledgeable consumers discover music that is new to them as an extension of their interests. No one does that like we do. There’s no question in our mind this is a viable business, both here and internationally.
The major label deals allow you to be profitable?
We wouldn’t be in business with them otherwise.
