Remember when ad-supported music was going to save the industry?
Spiralfrog was lavished with praise and endless press coverage, and major labels extracted millions in licensing fees before the ship sank. Nowadays, the darling is Spotify, though according to inside sources, US-based major label executives remain leery of the revenue-challenged company. Others, including MySpace Music, Imeem, Grooveshark, and even YouTube face difficult monetization challenges.
Why so rough? The problem comes from bottom-scraping CPMs, affinity concerns among big-name brands, and a reluctance by consumers to upgrade into premium packages. Indeed, many have written this space off as a hopeless pursuit, though Atlanta-based startup ‘Free All Music’ (freeallmusic.com) begs to differ. The group is focusing its model on free MP3 downloads, and more direct, action-based advertising deals.
So, instead of DRM-protected experiences with impression-based advertising (a-la-Spiralfrog), Free All Music plans to tie major consumer brands into direct downloading, sharing, and other engaged behaviors. “We’re confident that we’ll be in major [advertiser] budgets in 2010,” cofounder and CEO Richard Nailling relayed during a discussion Tuesday evening.
The company first announced themselves to Digital Music News earlier this month, though the more recent meeting included details on upcoming launch dates, as well as status updates on licensing and advertising negotiations. Specifically, Free All Music enters private beta next month, a public beta in December, and a formal launch during the first quarter of 2010, according to the roadmap.
So how does the experience work? Consumers will be able to browse a catalog of songs, but free downloads require the viewing of a brief, 15-second advertising video. The song is obviously chosen by the fan, but so is the advertiser – before downloading, a choice of different brands will be presented. That aims to sidestep sensitive issues that accompany the tying of brands with specifics artists. “Because the users are putting it together and it’s a private matter, there’s no implied relationship,” Nailling described.
After the spot is completed, a DRM-free MP3 is handed to the consumer. But the advertising campaign continues in a novel fashion. First, the username of the downloader is placed alongside the brand and blended into an ad unit. That unit is subsequently distributed across a network constructed by Free All Music.
Sound complicated? Nailling and company believe this experience is better and easier than illegal file-sharing options, and far superior to $1.29 downloads on iTunes. But users are limited to fifteen songs per month, and five per session, a major restriction and a potential deal-breaker for many fans.
Then, the issue of major label licensing emerges. Nailling pointed to “deep conversations with all the majors,” though some upfront licensing costs will be involved. “We are not being subject to the advances that have happened to other companies, the labels are really trying to work with us on that front,” Nailling disclosed. “But in terms of a pure revenue-share deal, that is not in the cards at this point.”
And this is anything but a risk-free bet. The company just raised a $990,000 round, though total investments are already approaching $3 million before the grand opening. At present, the team still needs to assemble the constellation of advertisers and labels to test the hypothesis. Then, the serious work of attracting, retaining, and growing a critical mass of users begins, itself a monstrous hurdle. Indeed, this is not a challenge for weak-stomached entrepreneurs, though anyone able to solve the ad-supported riddle gets serious bragging rights.
Paul Resnikoff, Publisher.