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.