eMusic sold; unlimited MP3 downloads nixed

VUNet sells the music subscription service to an obscure holding company, which will radically change subscriber policies.

eMusic, one of the oldest digital music subscription services still operating, is being sold by parent company Vivendi Universal after years of operating in the shadow of younger rivals.

According to a short statement provided by VUNet, Vivendi's online division, private New York equity group Dimensional Associates has agreed to buy the service for an undisclosed sum. Although VUNet is also reportedly seeking a buyer for other digital music properties, including MP3.com, those properties were not included in the deal.

eMusic subscribers began receiving notices this week telling them that the company's formerly permissive downloading policies would change dramatically. Previously, subscribers were able to download unlimited numbers of MP3s. The company's catalog focused on music from a wide variety of independent labels, rather than from the majors.

Under the new plan, subscribers paying $9.99 a month will be limited to just 40 downloads per month. A $14.99 monthly plan will allow for 65 downloads. Songs will still be distributed in open MP3 format, however, without the copy-protection restrictions imposed by services like iTunes, MusicMatch and others.

In a message to subscribers, the company said the reason for the change was the "intense financial, legal and technological pressure" that's facing the entire music industry. The company had struggled under the requirement of paying copyright holders for each download and had risked losing money on monthly subscribers who downloaded large numbers of songs.

"As a provider of music downloads, eMusic is subject to a complex system of intellectual-property rights and technological challenges that impose high costs and often uncertain risks on the company," eMusic's message said.

Dimensional Associates' other holdings include The Orchard, a company that aggregates and distributes the work of independent musicians, and the Digital Club Network, a company that distributes live music online. Executives of the equity group could not be reached for comment.

The acquisition is expected to close at the end of October. The new eMusic pricing plan will go into effect Nov. 8.

eMusic was purchased by Vivendi Universal in mid-2001 for about $24 million, as part of a wave of online media acquisitions by the media conglomerate. eMusic rose to prominence in the late 1990s as one of the most active and well-known of a first generation of online music companies, buying RollingStone.com, the Internet Underground Music Archive and other digital music properties.

Its pay-per-song model was badly undermined by the appearance of Napster and other file-swapping companies, however. In the past several years, it has largely lived in the shadow of newer services such as erstwhile Vivendi affiliate Pressplay, iTunes and Listen.com's Rhapsody, even though it's boasted subscriber levels of more than 70,000 people.

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