eMusic faces possible mutiny

eMusic CEO David Pakman has an interesting essay up at the eMusic-related blog 17dots today where he discusses recent rumblings about labels wanting to pull out of the service because they feel they aren’t getting enough money. He raises the point that rather than bringing less money to the table, eMusic actually brings considerably more: “Here’s the bottom line: the average customer only spends about $12 per year on iTunes; by contrast, the average eMusic customer spends about $168 per year with us. Imagine how different our industry would look if more retailers could serve their customers so fully.”

It’s a valid argument, but one the labels — Billboard reports there are six disgruntled enough to sever ties with the services — likely won’t buy. Pakman makes the point that music is an elastic good; as the price goes down, volume of sales goes up. But labels see the difference between 12 cents from eMusic and about 60 cents from iTunes and probably figure that without eMusic, they’ll sell more higher-priced tracks through iTunes.

It would be a shame for eMusic to lose a chunk of its impressive catalog. It contracts with about 13,000 labels, and Pakman reports that it sells about two-thirds of its 2.5 million tracks each quarter, proving it to be a true long tail operation. With 300,000 subscribers buying that much music, it would seem prudent for the labels in question to come to terms with the new model of music distribution.