Can Free Music Survive and Thrive?

I Like Music by RossinaBossioBAs I've been putting together the next Chinwag Live event (Music - who pays the piper? next week on 15th July, if you're around), it's becoming clear that the music industry provides one of the most dynamic and challenging environments for marketers, but despite the popularity of radio's online cousin, business models are still in a state of flux.

Online music consumption is growing rapidly through an almost endless number of channels, some legal, some paid-for, some ad-funded whilst illegal file sharing still represents the lion's share of listening and sharing.

As music, by its nature, continues to reinvent itself so too it seems are the online business models. Coupled with new technologies and the changing behaviour of music consumption I look forward with curiosity to see what another year will bring.

We are starting to see new suppliers to the marketplace, with the recent announcement by Virgin Media for its subscription music streaming and download service and rumours of a future Playstation music download service. Does this mean a tougher future for the small and other independent music services such as We7 and Spotify? Or does free (ad-funded) still win over a subscription model?

In a world where music is treated as a commodity, will these independent services providing value through technology and social offerings gain the market share? Or will we see music labels and artists themselves moving closer to their listeners? Sony Music has already started down this road, providing music streaming and playlist creation on their artists’ websites that take advantage of both ad revenue and associated merchandise sales.

Moving out of a culture of illegal downloading, the ad-funded free music model has made most sense for online streaming music services. This has also been validated by consumers, a recent study by KPMG showing some 60% willing to accept advertising in return for free digital content.

However, using advertisers to pick up the tab for music royalties has not shown strong success yet. We have already seen the demise of Spiralfrog and Ruckus in 2009 and it is not clear whether ad funding can will be enough to sustain online music services.

But what interests me, is why are traditional radio advertisers not flocking to online music services? Surely the rich user data generated from these services can offer audio advertisers high levels of behavioural targeting not found in radio? Or do the efforts of re-purposing and shortening radio ads for online not make economic sense when traditional radio audiences are so huge?

Join the discussion as we explore the future for monetizing streaming audio services at Chinwag Live: Music - Who pays the Piper? takes place on Wed 15th July, 2009 at The Slug & Lettuce in Soho, London. See for more info and to book tickets.

Pic courtesy of RossinaBossioB. Some rights reserved.