Universal Takes Free Music Plunge
from the questions-linger dept
We’ve talked plenty of times about how record labels, despite their oft-repeated insistence to the contrary, can compete with free — in particular, how they can embrace free music as a promotional tool and use it to sell other goods. One of the major record labels, Universal, has indeed decided to go the free route, but with a little twist: it’s going to work with a startup to make its entire catalog freely available through an ad-supported service. At first glance, this sounds pretty great, but a second look raises some questions, the biggest of course being how they’ll make this work commercially. When you see sites with massive amounts of traffic struggle a bit to monetize through ads, it simply underlines the point that having available ad inventory isn’t the only thing sites need to be successful through advertising. The startup, Spiralfrog, says its 13- to 34-year-old target demographic is very attractive to advertisers; but this is largely the same market that delivers low clickthroughs and CPMs to social-networking sites. All this comes before even figuring out how to split up the revenues and pay artists.
Another concern is that the company says its files will use some form of copy protection, which raises even more questions, in particular, will consumers have the ability to move files to their music players? The issue of DRM incompatibility among device vendors would say no, and Apple’s resistance to license out its FairPlay DRM means iPod users are likely to be left out in the cold — which won’t help this system gain traction at all. Using DRM could also limit the value of the music as a promotional tool, which The issue here isn’t that this free set-up will be competing with the likes of iTunes and Napster, but with P2P networks as well. This has been the issue all along, and the lesson still hasn’t changed: the labels must come up with something better than the file-sharing services to draw customers away. They can already get free music, and to switch services will take something offering them a better experience, not just an equal price. Universal certainly deserves some credit for trying this new business model, and let’s hope they can make it work. Update: Tech Trader Daily points out that iPod users will indeed be left out, and as an added bonus, our old friend Jay Berman, a former RIAA boss, is on SpiralFrog’s board.