Previous studies have shown that there is a difference between recognized and induced emotion in music listening. In this study, empathy is tested as a possible moderator between recognition and induction that is, on its own, moderated via music preference evaluations and other individual and situational features. Preference was also tested to determine whether it had an effect on measures of emotion independently from emotional expression. A web-based experiment gathered from 3,164 music listeners emotion, empathy, and preference ratings in a between-subjects design embedded in a music-personality test. Stimuli were a sample of 23 musical excerpts (each 30 seconds long, five randomly assigned to each participant) from various musical styles chosen to represent different emotions and preferences. Listeners in the recognition rating condition rated measures of valence and arousal significantly differently than listeners in the felt rating condition. Empathy ratings were shown to modulate this relationship: when empathy was present, the difference between the two rating types was reduced. Furthermore, we confirmed preference as one major predictor of empathy ratings. Emotional contagion was tested and confirmed as an additional direct effect of emotional expression on induced emotions. This study is among the first to explicitly test empathy and emotional contagion during music listening, helping to explain the often-reported emotional response to music in everyday life.