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Emusic.com axes third of workforce

It's all Napster's fault, apparently

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Napster battler EMusic.com last week rid itself of 66 staff - including three senior executives - in a bid to cut costs.

And the reason? Yes, you guessed it: Napster, at least in part.

"I would definitely say Napster has been a cause for some of our problems," said Gene Hoffman, EMusic.com's CEO. "It's difficult to get customers to pay for music when it is so easily available for free."

True, but EMusic.com's problems haven't been helped by the downturn in online advertising sales. Advertising generates around 70 per cent of the company's revenue - the rest comes from users' subscriptions.

The company had just 3000 subscribers at the end of September 2000, each of them paying $10 a month to download songs from a list of 150,000 titles. EMusic.com's catalogue comes from various independent record labels who together account for just eight per cent of the US music market. Hardly big league, top-of-the-pops stuff.

Whatever, it's not working too well. So out go 36 per cent of the company's workers, including its CFO, COO and executive VP for business development. The CFO's role will be picked up by the company's corporate controller and the others will not be replaced. EMusic's New York office will be closed.

Hoffman said he hopes to increase the share of the company's revenue generated by subscriptions, but that's happening anyway, simply by the fall in advertising revenue. Given his stance on Napster, it doesn't look like Hoffman's company is reeling in punters at ten bucks a head. So to increase subscription revenue, he has little choice but to raise the price, which isn't likely to boost customers' goodwill.

Engaging in desperate legal action against MP3.com won't help either.

Hoffman's fight with Napster began last autumn, when he announced his company would track the trade of music that EMusic owns the digital distribution rights too. Anyone offering EMusic.com's songs on Napster would be asked to pack it in - or Napster would be asked to boot them off. ®

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