Amazon/Pepsi DRM-Free Music Give Away Shows Yet Another Business Model For Free Music

from the for-everyone-but-Doug-Morris-of-course dept

Pepsi did a big promotion with Apple a few years back to give away iTunes songs, and the latest news is that Pepsi has crossed over to the other side and will be doing a similar promotion with Amazon.com offering free DRM-free downloads from all the big labels... except Universal Music. This story actually demonstrates two important points. First, the fact that the labels themselves apparently are pushing this as an alternative to doing the iTunes promotion, shows how some of the bizarre industry logic has twisted things around. The major labels were originally the ones who were totally adamant that iTunes needed to carry DRM, which actually is part of what made Apple so powerful in the first place -- creating tons of lock-in among customers who wouldn't switch to another provider. However, that is coming back to haunt Apple, as the labels are more reluctant to allow it to also offer DRM-free tracks. No doubt, Steve Jobs recognized this fact a year ago when he called for the labels to drop DRM.

A second, perhaps more important point, is that this once again shows that there clearly are business models surrounding "free" music. One of the points that we've tried to make when people claim that there's simply no incentive for anyone to create music if the customer is getting it free is that there's always going to be incentive for someone to pay for the music in some form or another. In this case, it's Amazon and Pepsi who are paying for the music itself ($0.40/track) recognizing that giving away that music for free helps both of them promote their own businesses. In other words, the music is acting as a resource to make their own business models more valuable. I think I've heard that idea mentioned before somewhere. Of course, that doesn't mean the record labels have figured this out. And, it's especially not surprising that Doug Morris has refused to let Universal Music go along with this, as he's already made clear that he doesn't believe in the concept of promotional goods, no matter how much damage it might actually be doing to musicians under the Universal Music umbrella.


Reader Comments (rss)

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  1.  
    identicon
    Chuck Norris' Enemy (deceased), Jan 14th, 2008 @ 9:04am

    Great!

    I'm gonna go order a case of Pepsi from Amazon.com!

     

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  2.  
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    Anonymous Coward, Jan 14th, 2008 @ 9:37am

    Like this is something new?

     

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  3.  
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    Joel Coehoorn, Jan 14th, 2008 @ 10:09am

    Price competition between labels

    In this case, it's likely that Pepsi is footing the bill rather than a consumer. The labels will probably still be paid full price for each song (or something close to it determined between Pepsi and the labels).

    You could make a case that this doesn't matter; the point is that it's still free to the consumer. But I don't think that's so if the labels are still getting paid directly beyond the actual market value of the music.

    What's more interesting in this case is that by sitting out, Universal is forgoing revenue from the promotion in a way that will be very obvious to consumers. They have single themselves out somewhat as being more expensive and will lost money because of it. It would be nice to see this kind of thing continue, where labels have to compete with each other.

     

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  4.  
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    Chronno S. Trigger, Jan 14th, 2008 @ 10:11am

    Re:

    All the music studios (except Universal) joining with Pepsi to give away DRM free music? Sounds new to me. The big thing that this article gets at is Mike was correct in saying that free can be part of the strategy, and the ones that stay behind are just going to get the shaft.

     

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  5.  
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    Anonymous Coward, Jan 14th, 2008 @ 10:17am

    This example may be new but the concept has been around for quite a while.

    Maybe Universal didn't like the price?

     

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  6.  
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    Anonymous Coward, Jan 14th, 2008 @ 10:20am

    Re: Re:

    The other AC mostly likely meant to say, "i like. this is something new!"
    ...but since he did not, I will! (Chronno, it's good to see you around TD for the past year - always a good follow-up post!)

     

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  7.  
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    matt, Jan 14th, 2008 @ 10:22am

    what I wonder

    I wonder if they are watermarking this music with their "DRM2.0"

     

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  8.  
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    chris (profile), Jan 14th, 2008 @ 10:32am

    Re: Price competition between labels

    In this case, it's likely that Pepsi is footing the bill rather than a consumer. The labels will probably still be paid full price for each song (or something close to it determined between Pepsi and the labels).

    yeah, one of the ways that you can make money from free music is to get someone to pay you to give it away. this pepsi thing is one example.

    how often have you heard a song on a tv show or in a movie or commercial and become interested in it? people who want to make money using the song would still have to pay you to use it, and giving the song to consumers for noncommercial use is a great way to add promotional value to the song.

    You could make a case that this doesn't matter; the point is that it's still free to the consumer. But I don't think that's so if the labels are still getting paid directly beyond the actual market value of the music.

    the point of many articles on techdirt is that the business of direct sales of music is dead and that the future of the music business lies in finding new business models that make money by some other means than selling songs to consumers. pepsi buying tracks and giving them away in a promotion is one way to make money without selling directly to consumers.

    is the future of music selling tracks to pepsi? hell no. but selling tracks to companies so they can give them away as a product promotion is one of many ways that you can monetize music.

     

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  9.  
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    Paul Thatcher, Jan 14th, 2008 @ 10:36am

    Free Music

    Its a new day folks, it has been for quite some time. Existing record companies will manage the old model as long as they can. It is very difficult to stop momentum on a dime. Just ask Kodak. Music may eventually be entirely free to the masses packaged as an add-on when you purchase a cup of coffee, tee shirt, bra or a gallon of gas. It has become extremely easy and affordable to create CD quality recordings in your basement or bedroom, put them on MySpace or any other digital distribution channel of choice to promote your cause. So there is a glut of free music out there some good some not and we're more than willing to listen to lo-fi MP3s. So, although there is still an emotional connection to the music, there is no longer be an economic one. Yes, the good old days are over for many of those highly compensated music mavens & mogels. It's back to Chevrolet and hambergers. Enjoy.

     

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  10.  
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    Michael Long, Jan 14th, 2008 @ 10:50am

    Partronage

    "there's always going to be incentive for someone to pay for the music in some form or another"

    That's just as much a disadvantage as it is an advantage, as in this case the advertisor has effectively become a "patron" of the arts.

    But history has shown that patronage is a less than-optimal solution. What happens when you can't find one? Or when he decides that he's no longer interested in "wasting" his money?

    Or if she decides there needs to be quid pro quo, that you need to remove something she finds offensive or distastful, or otherwise you're out on the street?

    There are alternatives to a lot of things. That doesn't necessarily make them good alternatives.

     

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  11.  
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    Anonymous Coward, Jan 14th, 2008 @ 10:56am

    Yeah, I guess all you new world digital guru's invented giving something away for free. It never happened before, right?

     

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  12.  
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    Chronno S. Trigger, Jan 14th, 2008 @ 12:17pm

    Re:

    Assuming that your referring to the previous AC post that I responded to saying "Like this is something new?" (if not, please ignore this post)

    You're just focusing on the free part. Pepsi did this with iTunes before. I downloaded a few hundred songs that way, pathetic I know.

    The big issue is that the record labels are offering DRM free downloads. On this grand of scale, it's a vary new thing. The fact that all but one have agreed to do this is unheard of. That's the big news here. The DRM free part.

     

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  13.  
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    Borse, Jan 14th, 2008 @ 2:30pm

    That is crappy business Model.

    In the future I do not want to have to go to different giant corporations to get the music I want.

    It's much more convenient still to illegally download that music than go through the trouble of getting if off Pepsi.

    after all, thats whats really at the heart of pirated music, Convenience, not free, as free is just one part of a big convenience.

     

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  14.  
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    Mike (profile), Jan 14th, 2008 @ 3:21pm

    Re: Partronage


    But history has shown that patronage is a less than-optimal solution. What happens when you can't find one? Or when he decides that he's no longer interested in "wasting" his money?


    No one said it was the only business model. The point is that there are many business models, and this is one.

     

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  15.  
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    Mike (profile), Jan 14th, 2008 @ 3:22pm

    Re:

    That is crappy business Model.

    You want to know what's an even crappier business model? Trying to sell something that everyone else is giving away for free.

    In the future I do not want to have to go to different giant corporations to get the music I want.

    No one said it was the only business model. The point is that there are many business models, and this is one.

     

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  16.  
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    Paul, Jan 14th, 2008 @ 3:28pm

    Or maybe, the truth

    They are giving away free downloads so that people try to service and then start paying for downloads.


    Why don't you totally distort something else so that it fits your overused template, Mike?


    Why not talk about how AOL gave away millions of "500 free hours" CDs and how that led to the present day internet being free.

     

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  17.  
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    Sos, Jan 14th, 2008 @ 7:20pm

    Getting closer

    “If you have three Pepsis and drink one, how much more refreshed are you? You, the redhead in the Chicago school system?”
    “Pepsi?”
    “Partial credit!”

     

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  18.  
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    meh, Jan 15th, 2008 @ 1:11pm

    personaly i dont care if the music is free. i just want to be able get a song from URGE that is in win media play and be able to put it on my ipod/iphone. and not lose 1500$ worth of music from itunes when my hardrive crashes just because i cant really make copies. the sharing part is great for the one who is trying to download music, but it isnt fair for the artist who created it and now some p2p is raking in money from advertisement because people are downloading those artists music. They should allow sharing but not allow advertisements on thing like p2p network. so since it costs money to create or host things like p2p that would eliminate all music sharing things at least on that scale. i dont think there is a problem if people share between friends through AIM or something; it would be the same as if i gave a cd to someone.

     

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