In digital music retail there is Apple in one corner and then there is everybody else. Apple’s iTunes store accounts for approximately seventy percent of the market. The runner up, eMusic, has less than ten percent. This week eMusic’s hoping to get a few more customers, especially from older demographics, with the introduction of audiobook downloads starting Tuesday.
eMusic’s book formula will follow the same recipe the company has used for songs. The books will be sold via subscription in an unrestricted MP3 format (e.g. free of digital rights management encryption) at lower than average prices per title. The absence of DRM technology will insure their offerings are playable on all MP3 players including Apple’s iPods. That portability, especially to the leading iPod product line, has been the root of their success. It has also been a handicap. Because all of the major music labels have historically required DRM encryption on any of their songs being sold, to go DRM-Free and insure portability eMusic had to instead build their brand around independent labels and lesser known artists. (Two of the big four labels now have DRM-Free programs: EMI has broadly moved away from DRM and Universal Music is experimenting with DRM Free music but neither have licensed their catalogs to eMusic at this time).
One of the biggest questions looming for eMusic is whether the depth of titles will be large enough to be of interest to their customers, and whether publishers will be more open minded than the music labels about going drm-free. (The digital book market is much smaller than in music and absent the large publishers, the small houses won’t likely be able to provide enough depth.)
Initially, several major publishers are demonstrating a willingness to experiment. Random House will use the launch as an opportunity to test market the sale of 500 titles. Hachette Audio will test 15 titles. Penguin Audio will offer the same titles it releases on iTunes (totaling about 150). Other publishers, including Audible and Recorded Books, won’t participate. Audible runs their own subscription service and also sells through iTunes.
The other question looming for eMusic is whether any of this matters and consumers will care. For one thing, there’s questions about the format: in digital format the files for audiobooks can be large, and slow to download. Also, there’s a question of market sizing: unlike music which consumers will listen to again and again, audiobooks are often viewed as single use items – and that can lower the value proposition for some customers who might otherwise consider buying into a subscription offering like eMusic’s. As a look at the financials of audio book publisher Audible (NASDAQ: ADBL) show, there is money to be made but the scale is relatively small. (Audible is one of the larger audiobook publishers and has about 15k titles but they only earned revenue of a little more than $80m for fiscal 2006. Moreover, they’ve lost money for the significant majority of their years as a public company. Their growth trends are positive, especially for their second quarter, with earnings per share inching toward profitability but the numbers are far from staggering).
For eMusic, The relative cost to test these questions is small. That makes the effort arguably every bit as much of an experiment for them as it is for the book publisher’s participating. There’s little to lose.
Monthly subscriptions for the offering will price at $9.99 for a single title per month, and $19.99 for two books a month. As part of an introductory offer, new registrations within the first 14 days will get one complimentary book.