SpiralFrog, Advertising and Free Music

A few days ago, SpiralFrog launched its ad-supported music download service. The idea is that music enthusiasts can download songs from SpiralFrog for free from artists like Aretha Franklin, Bob Marley, No Doubt, Sonic Youth, R.E.M., etc., as well as indie artists, while musicians and bands are compensated from licensing deals reached between SpiralFrog and the artists' publishers. SpiralFrog recovers its licensing expenses through advertising deals on its web sites.

SpiralFrog is great for everyone that wants to download music for free, but I see several potential problems with the business model itself: 1) there are a ton of expenses involved with running a data intensive streaming/download company (e.g. bandwidth, disk storage, load balancing across multiple servers, etc., not to mention engineering costs). I don't think advertising alone can absorb these costs as well as cover the company's payroll, licensing agreements and other operational costs, as SpiralFrog is a far different company than YouTube (user generated free content) and Google (advertising on millions of web pages); 2) advertising is likely to become a part of the download process, and this may become a deterrent for even the most frugal music listener; 3) there is a legitimate concern that your personal information may be sold to an advertiser, as advertising is how SpiralFrog makes money. Although, it is important to note that SpiralFrog claims, at least for now, that they do not sell your personal information.

Additionally, SpiralFrog requires that you install their download manager and run it locally on your computer, while only allowing you to download protected WMA files. That alone will be a big hurdle for many music enthusiasts, but, it's free so people will use the service.

It goes without saying that the music industry is going through a sea change. It's like the wild west, as scores of startup companies charge ahead trying to build models that stake their claim in the new territory of what will become the music industry. However, not all of these models will succeed, and a tidal wave shakeout amongst these companies is coming.

With that said, the existence of these companies will not be based on how much free music they can give away, but how well they pay the artists whose music they are providing. Primarily because the next generation of musicians and bands are all DIY artists, and more and more accessible and inexpensive technology is shifting control into their hands, allowing them to become the ones that determine market prices, not labels, music companies or listeners. As Derek Sivers stated, "people like to pay...they love supporting independent musicians."

UPDATE (10.26.2007): I’m beginning to think that companies like SpiralFrog may actually be a part of the solution in monetizing the P2P filesharing community. That is, by providing a platform for allowing music enthusiasts to download music for free, while at the same time paying artists for downloads. There are still a ton of issues that need to be hammered out, but SpiralFrog’s philosophy is certainly heading in the right direction.

Comments

[mars]

I totally agree on the fact that the industry is going towards more power to the artists. I know another marketplace called www.9thX.com and the novelty is that you can resell the content when you don't want it..I think it is pretty clever and the artists are always respected...