“Wither” is the operative word, it seems, when it comes to retail music sites that rely solely on ad-based revenue.
Give music lovers what they want for free and get advertisers to pay the bill. That was an intriguing idea when it first sprouted in the digital music scene a few years back. Eliminate the piracy, capture all those music fans who are averse to paying for music and still generate income for both the retailer and the music rights holders. Seemed like a slam-dunk.
Yet, high-profile digital retailers like Ruckus, Spiral Frog and Imeem that adopted this model have shriveled and died. Another, European-based Spotify, in an apparent attempt to stay viable, is employing both free music and paid models. But they seem to have painted themselves into a corner with this strategy. To wit, they’re currently trying to launch a paid subscription-based service in America but are having one heck of a time getting any of the big U.S. labels on board. It seems the majors are less than enthusiastic about the company’s prospects of getting their consumers who are used to getting music for nothing to start paying.
What happened, then, to that mini love-in within the industry that occurred just a short time ago around ad-supported music sites?
I think a number of factors have come into play.
First, while music fans may have become used to artists “selling out” and pimping for major brands, they aren’t keen on having to listen to or watch commercial messages before grooving to their favourite rapper or indulging in a little saccharine pop. Kind of spoils the experience. Duh!
Second, it’s pretty clear that at least some of these online enterprises have been poorly run. It’s not uncommon for entrepreneurial types to get caught up in the excitement around a new business concept and see things through rose-coloured glasses. Trivial matters such as having a responsible financial plan in place, setting a realistic time-frame for reaching profitability and the simple concept of bouncing your idea off of your potential customer base by means of sound market research can get lost in the shuffle. Not to mention in this case failing to factor in how vulnerable an ad-supported business model would be in a faltering economy.
On top of it all, more and more consumers are actually getting used to paying for music online. I. E. Market Research recently came out with a study that predicts a doubling in the number of paying digital music users over the next five years, with digital revenues quadrupling in the same period. While I think that’s perhaps a tad optimistic, the trend toward public acceptance of paying for music is definitely real.
It all adds up to the ad-supported music service being another .com flash in the pan. It surely won’t be the last.