NEW YORK (CNNfn) - Online music retailer eMusic.com Inc. on Monday launched a subscriptions-based, all-you-can-download music service that will allow enthusiasts to grab their fill of popular tunes for about $10 a month.|
The move embodies what some experts say is a high-growth scenario for online music sales, a market that research firm Jupiter Communications projects will reach $5.4 billion in 2005.
The timing of the new service is significant. It comes just two days before a San Francisco court decides whether or not to pull the plug on Napster, the controversial song-swapping service with 20 million users that the recording industry has charged with encouraging copyright infringement.
Redwood City, Calif.-based EMusic.com (EMUS: Research, Estimates) said the service, titled "EMusic Unlimited' will let customers download music as often as they choose from EMusic's digital collection of over 125,000 songs compressed into files in the MP3 format.
Songs from artists, ranging from Bush and Elvis Costello to Duke Ellington, could all be transferred from EMusic's system to a subscriber's personal computer at will. Fees for the service start at $19.99 for a one-month stint, and fall to $9.99 a month for a full year commitment.
Unlike Napster's systems, which allow users to swap songs residing on other users computers for free, and therefore providing no compensation to the artists that created the songs, EMusic said it offers "confidence" that artists will be paid.
The failure to compensate artists have hurt sales of recorded music and could threaten their ability and incentive to make music in the future, the recording industry claims.
In response, Napster said its service helps boost record sales by allowing users to sample songs before they buy. In a study released last week that tends to support Napster's position, Jupiter Comunications found that users of Napster software are more likely to buy more records than non-Napster users.
Both sides in the Napster case are scheduled to appear in a San Francisco court on July 26 before Chief Judge Marilyn Hall Patel of the U.S. District Court, Northern District of California.
"The EMusic Unlimited subscription service offers a legitimate alternative to tools like Napster by providing a compelling solution for both the music consumer and the music business," said Gene Hoffman, EMusic.com president and chief executive in a statement.
"The exclusive, long-term digital music licenses that we've amassed over the past two years allow us to offer our catalog in a service that could only be matched by the five major record companies in terms of rights, breadth and quality," he added.
Under EMusic Unlimited, subscribers will also gain access to editors' recommendations, information about new releases, and special MP3 tracks and events from artists with exclusive deals with EMusic, such as Vice, a group headed by singer Corey Glover, formerly of the rock band Living Colour.
However, subscribers are asked not to share the files with anyone else. "You may only make copies of any file obtained through the service for your own personal use," the company said.
Subscription seen as best online model
Experts suggest that a subscription service will be the most profitable and functional method for selling music over the internet, rather than a piecemeal retail model, where songs are sold individually for up to $5 each.
"While individual downloads will continue to be effective marketing tools, the majority of digital music sales will come in the form of online subscriptions," New York-based Jupiter Communications said on Monday.
"The growth of networked music sharing, such as Napster, reveals a consumer readiness for subscription services, which will account for $980 million in 2005 versus a la carte download music, which will grow to $531 million in 2005," Jupiter said.
At $3.8 billion, sales of physical products, selected online and then shipped by mail, will still dwarf Internet-based distribution, according to a survey on the outlook for the industry released Monday by Jupiter Communications.
Companies such as EMusic, Musicmaker.com and CDnow, have in the past two years attempted to build a market for digital music downloading. But their journey has been slowed by a myriad of factors, including security concerns, that have limited the number of songs made available by major labels, and the slow adoption by consumers of high-speed Internet access, which would reduce the time to download an album to minutes rather than hours.
With the advent of song-sharing programs like Napster and Gnutella, many experts now suggest that granting users access to many songs for a low, flat price will win over the major labels, which have so far resisted the notion.
"Record labels and intellectual-property owners have demonized various forms of online music sharing, even as it has gained enormous traction among consumers," said Jupiter analyst Aram Sinnreich. "The truth is that a better-informed user will purchase more music products online and off."
The major labels Sony Music Entertainment and Seagram Co.'s Universal Music Group have said that they will launch subscription-based online services, but the companies have yet to deliver details of the proposed systems.
Shares of EMusic jumped more than 24 percent on Monday after the news was released. EMusic stock rose 1/2 to 2-5/16 Monday afternoon.
--Reuters contributed to this report