Yet Another Attempt At Ad Supported Music

from the if-it's-more-annoying,-it-won't-work dept

Back in October, we wrote about plans for yet another "free, but ad supported" music download startup, but didn't see how the economics could work out. That site, FreeAllMusic, is apparently now getting set to launch, but it still doesn't make much sense to us. Basically, you can download music (two of the four major labels have signed up) for free -- and it's not encumbered by DRM (that's good), but you have to sit through some sort of video ad before you can get the music and you are limited in how much music you can download. The site's CEO claims "We have made this process easier than stealing."

We'll ignore the confusion (most likely intentional) about the difference between infringement and "stealing" and focus on all the other problems with this service. First of all, it's not easier than infringing. You have to sit and watch an ad. You don't have to do that on file sharing networks. Second, the assumption behind the service is that people would use this the same way they use iTunes: meaning only a very small number of downloads per month. Initially, that means 20 downloads per month, total, and no more than five per session. That may be how people use iTunes, but that's because each download costs money in iTunes. One of the reasons people prefer file sharing systems is because they're not limited that way and can really easily sample lots of music quickly.

But the biggest problem with this concept remains with the basic economics. Since the argument remains the same as I stated a few months back, I'll just repeat it:

You've got the record labels, who are used to getting approximately $0.67 per downloaded song. Assuming that needs to be made up by the ad (and even ignoring any profit for the site), then every single ad shown needs to cost that same $0.67. Translated into traditional ad terms, that's a CPM of $670. Yikes. I don't know any advertiser will to pay anything close to that -- even if it's targeted and you have a half decent chance of the person paying attention. Most CPM ad rates online these days are in the sub-$5 area. Convincing advertisers to jump to a $670 CPM on an unproven model? Good luck.

I'm all for experiments and new business models -- especially those that make use of free music. I just don't see this particular one getting very far. The economics are just not that compelling for anyone involved.

Filed Under: ad supported music, ads, business models, downloads, economics, free, music
Companies: free all music, freeallmusic

Free MP3s... If You Sit Through An Ad

from the interesting-model...-but... dept

I've seen all sorts of business models involving "free, but ad supported" music, but none of them really seem sustainable. This latest one is different, but I'm still not sure it has a chance. Rather than the typical "play music and have ads off to the side somewhere" model that most take, Free All Music, gives you a chance to download DRM-free MP3s... if you first watch a video ad. They even let you pick what sponsor you want to let "buy you" the music (and then, that advertiser gets to put your user name in future ads, noting that you downloaded the music).

While this is a more creative use of advertising that probably has more value to the advertiser than the typical ad-supported music sites (where most people just ignore the ads), it still seems likely to have some serious problems. First, the site is betting that consumption habits on such a site would be the same as iTunes -- 15 songs over the course of three months -- and is looking for ad deals to support that. But... that assumes that as the price drops from $1 to "time spent watching an ad" consumption wouldn't go up. Without the monetary barrier, it seems likely that consumption would increase significantly.

On top of that, I don't really see how the economics work, given traditional models in both the music and ad industry. It's not that those models necessarily make sense (in fact, I'd argue neither make sense), but it's what both sides will expect. On that front, you've got the record labels, who are used to getting approximately $0.67 per downloaded song. Assuming that needs to be made up by the ad (and even ignoring any profit for the site), then every single ad shown needs to cost that same $0.67. Translated into traditional ad terms, that's a CPM of $670. Yikes. I don't know any advertiser will to pay anything close to that -- even if it's targeted and you have a half decent chance of the person paying attention. Most CPM ad rates online these days are in the sub-$5 area. Convincing advertisers to jump to a $670 CPM on an unproven model? Good luck.

Finally, even if it's "free" it sounds pretty inconvenient. The fact is that people do have alternatives, such as file sharing networks. While they're not legal, they don't require you to waste a bunch of time before you can get the music you want to listen to. I'm sure some people would use it, but not enough to really matter long term.

Filed Under: ad supported music, mp3s
Companies: free all music