Free ad-supported music coming closer to reality

By March 10, 2008 6 Comments

Stimulated by news of a new service from Myspace, a couple of weeks back we were talking on this blog about how free ad-supported music was on it’s way but that unrealistic pricing assumptions from the labels were holding the market back.

Maybe not for much longer.

Reported on Mashable this morning:

Reports were filed last month by the media concerning MySpace’s purported negotiations with the world’s four largest record labels to gather rights for its own music distribution platform. Today, Joshua Chaffin of the FT talks of learning that those talks may proceed to legitimate agreements among MySpace and at least three of the four labels – Sony BMG, Warner, and EMI – by the end of March.

(I would have linked to the FT were it not for their paywall.)

Universal are the only label that aren’t close to a deal and apparently their issue is an outstanding lawsuit rather than anything commercial.

Assuming our previous conclusion about that labels are asking for more per track than ads can realistically provide is correct then one of three things is happening.  Either the labels are lowering their expectations, Myspace is planning to subsidise their music service, or Myspace believes they can monetise the ads better than We7, QTrax, Imeem and the other providers in this market.

I really hope it is the first of these.  Myspace subsidising the market might be good in the short term for consumers, but would be bad for the medium term health of both the music and social networking industries.  Similarly – if they are being more aggressive in their monetisation assumptions I would worry that they may end up losing money.

On the other hand, if the labels are now asking for less that is great news – we should see some of the great services that are out there blossom and some entrepreneurs and their investors make some good money.

As Mashable points out the winners will be those who execute the best – and that won’t necessarily be Myspace or Facebook (also rumoured to be in discussion with the labels).  Music is a big category and one that is important enough that a lot of people will hunt around to find the best service rather instead of simply accepting the first half decent one they come across.  The success of iTunes has shown us that.

The best I have seen so far, by a mile, is Sweden’s Spotify – a company I haven’t talked about much here because they are somewhat in stealth mode.  The cat seems to be increasingly out of the bag now though.  This post from Varsavsky waxes lyrical about how great their service is.