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eMusic merges with e-book distributor, loses CEO

The pioneer in subscription music appears to be in retreat as tech giants show more interest in the business model.

As interest grows in the online music subscription sector, one pioneer appears to be throwing in the towel.

eMusic quietly announced a merger yesterday with K-NFB Reading, an e-book distributor founded by noted inventor and futurist Ray Kurzweil. Adam Klein, the company's chief executive for the past three years, has also left the company, The Wall Street Journal reports.

"I am very pleased with the significant repositioning of the company and its future direction," Klein said in an e-mail to the Journal confirming the exit.

The newly merged company will "create a consumer-centric interface that makes discovering, interacting with, and purchasing all kinds of media content more accessible and seamless for consumers," according to a brief statement sent to record labels (see below).

Terms of the merger were not revealed. CNET has contacted eMusic for more information and will update this report when we learn more.

eMusic, which started selling digital music on the Internet in 1998, survived as stores from MTV, Microsoft, Sony, Yahoo, and AOL came and went. The service allowed subscribers to download at a fixed monthly price a certain number of songs in MP3 format, which allowed songs to play on any digital music player.

However, because the songs were being distributed without copy-protection software, the big record labels shunned eMusic for years. The recording companies have since acknowledged erring in that strategy by embracing the format.

The merger announcement comes a little more than a month after the company announced it was abandoning the subscription requirement, instead adopting the retail model employed by Apple and Amazon.

eMusic's apparent retreat from the subscription model after more than a decade comes as Apple and Amazon have reportedly shown interest in the sector. Apple CEO Tim Cook reportedly met with Beats CEO Jimmy Iovine about a potential partnership involving Beats' planned music service, while Amazon is reportedly in talks with record labels about a similar service.

eMusic's statement to labels:


Dear eMusic Partner, We are excited to announce today the merger of eMusic and K-NFB Reading, Inc. (d/b/a Blio, Inc.) into a single company called Media Arc, Inc., which will offer a comprehensive source of more than 17 million songs, 40,000 audio books, and 600,000 eBooks. Both eMusic and K-NFB will remain as operating units of Media Arc, Inc.

As a new company, eMusic and K-NFB will leverage their combined technologies and expertise to create a consumer-centric interface that makes discovering, interacting with, and purchasing all kinds of media content more accessible and seamless for consumers. The goal is to be able to sell more content for our partners by providing electronics manufacturers, retailers, MVPD/wireless companies, and others with a multimedia content solution to better compete in today's market.

Media Arc's mission is to provide the best digital media discovery experience possible by leveraging cross-content insights to recommend new music and books to avid readers and music collectors alike. This will present both authors and artists with a unique opportunity to expand their fan base, reach new audiences, and of course sell more content. Founded by Futurist Ray Kurzweil with financial backing from former Microsoft CFO Michael Brown and media distribution giant Baker & Taylor, Blio, Inc. has built one of the most technologically advanced e-readers on the market. eMusic is a pioneer of the digital music space, with roots in helping music fans discover their next favorite artist or album dating back to 1998.