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Exclusive Interview with Robert Kohn, Chairman of Emusic.com
As the debate over Napster and free music on the Web continues, few have watched more closely than Robert Kohn, chairman of Emusic.com. Kohn's company was the first to make a business of selling downloadable music on the Web, but its stock has plummeted in recent months partly over fears that Napster's free music model (some call it stealing) has made paying for downloads at least temporarily moot.
by Michael Grebb, Special Correspondent
Even though Emusic has sold some 2 million downloads so far, it just launched a new subscription service that will allow consumers to download multiple songs for one monthly fee. Kohn says the decision to offer a subscription service isn't a result of competition with Napster, although the model would seem similar to the all-you-can-eat approach popularized by the Napster community (Emusic is also reportedly in strategic discussions with Napster; Kohn has no comment). In any event, Kohn took time to give BizReport his take on the current digital music scene and where he sees it going in the future.
MG: Why is Emusic going for the subscription model now? What's the main goal?
RK: Now that we have exclusive licenses to over 125,000 songs, representing the sixth largest music catalog in the world, we have the breadth of catalog to offer a compelling subscription program. Until now, the market hasn't really been ready for an all-you-can download model. Now that we've been doing pay-for-downloads for a year-and-a-half now, our customers and our labels are much more comfortable with the paradigm shift.
MG: How much was the decision to offer the Emusic Unlimited subscription service influenced by competition from Napster and Gnutella, which allow free downloads?
RK: Since day one, we've always known that we'd offer a subscription service. Napster just allowed us to deliver it a lot sooner because people are now comfortable with being able to download whatever they want. Emusic Unlimited provides a great alternative to free file-sharing programs. Music fans get unlimited amounts of music in the most popular format while paying much less than they're used to with CDs -- and collecting that content still feels free to them. And, just as importantly, musicians and labels get financially compensated for their work.
MG: If Napster was shut down eventually, how much if at all would Emusic's business model evolve?
RK: The shutting down of Napster would raise the cost of stealing; the subscription model has lowered the cost of downloading music legally. The two are converging to make subscribing to music as easy and natural as subscribing to movies on HBO, Cinemax, Showtime and other entertainment channels.
MG: Despite what happens with Napster, how do you see the concept of file sharing evolving over time, and how will it effect the future of digital music?
RK: To me, Napster has already served its purpose in two ways: One, it's shown everyone in America that the future of music is definitely digital, and two, it has also shown the mainstream entertainment conglomerates that if they don't make their product available in a low-cost, open format, their potential customers will be willing to steal it instead. We think it's only a matter of time that all the major catalogs will be available under a subscription service. If it's easy to use and the cost is reasonable, I don't see that mass file sharing will be viable.
MG: What will the music industry look like in 10 years? Are the record companies necessarily doomed? If not, how will they survive?
RK: People don't realize that there are two different parts to a record company -- The labels that are interested in finding artists that will have the next big hit, and distributors that are only interested in packaging & selling shrink-wrapped shiny discs. I think the former will still be very relevant in 10 years but the latter will need to evolve or face huge problems.
MG: Now that Napster has influenced consumer attitudes considerably, do you think Emusic's core business of pay-per-download will survive? Wall Street obviously has its doubts. Are consumers willing to pay for digital music on an a la carte basis or do you think subscriptions, advertising, and other means will be the predominant way that artists and labels get paid in the future?
RK: We've sold 2 million MP3s in the standard, 'a-la-carte' method so I don't think you can discount it so quickly. However, the subscription model is very much like using Napster, except your credit card gets charged a small fee once per month. Eventually, there will be a mix of subscription and pay-per-download -- it's just still an early market. As all of this matures, it will reflect they way people buy music today: Some people buy one CD a year, some people buy one CD every day. The music fan and the artist simply have more options.
MG: Any other general thoughts on the future of digital music?
RK: Yes. Buy my book, Kohn On Music Licensing. Seriously, I think the future looks bright for both the artists and consumers. Before the advent of the subscription music service, artists and consumers have been at odds. When the dust settles on the Napster case, and consumers begin subscribing like they do for cable channels, the Internet will open even more opportunities for artists to monetize their creative works and for consumers to get the music they want any time, any where, any way.
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