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Paid downloads have helped, but it doesn’t look like it’s going to be enough to save the record business. Is Britney’s next album going to have radio-style ads in it?

There’s an interesting article in the latest New Media Age magazine. It was brought to my attention by a colleague of mine, who is more involved in that side of things.

It concerns a discussion that took place at the recent Midem in Cannes to do with the promise of the new ad funded online music services such as Spiral Frog. It turns out that Spiral Frog has had a really significant shakeup at the top end, and it seems unlikely that they’re going to be on track for a launch any time soon.

However, one significant piece of consensus that came out of this discussion is that it seems unlikely that the music industry is going to realise its dreams of returning to its former economic glory through downloads alone.

Mark Mulligan, research director at Jupiter Research thinks that 2007 will be the year of the ad funded download. He says that the pay to download model is not enough to turn things around and that it has failed to capture the imagination of young music consumers. Ads, he thinks, are the way forward.

Unfortunately, it was unclear as to how the new ad funded system might work — and there are fears that if it works too well, it may well spell the end of the high street retailer. His solution seems to be to impose limitations as to what users are offered.

Now of course, the reason that the major record labels are so keen to find a way to monetise music downloads in ways other than a simple purchase is the fact that downloading from peer-to-peer networks is steadily gaining in popularity. At present, it seems that three times as many people are downloading music for free they are paying for it online. Moreover, each one of them is downloading far more music than the people who are paying for it.

Naturally, this overlooks the fact that most of the people buying the music are also the people downloading it for nothing.

However, the idea that you might solve this problem by restricting access or by reducing the level of service or by adding intrusive commercials is sheer nonsense. One of the main reasons people get driven to the peer-to-peer networks is the poor service, the lack of consumer friendliness, the price and the ongoing digital rights management chaos. In other words, record labels are often competing with a free version of their own product with a lesser product.

Ads are already the biggest switch-off factor for music radio. It’s one thing to put ads into a music mix that has a dozen competitors in the local area. Quite another to insert them into something like a pop song or album that has literally millions of ad-free competitors from throughout the history of recorded music.

Unsurprisingly, a panel of young music fans declared unanimously that they were unwilling to accept audio ads around music. They might be prepared for a pre-roll video commercial before a movie, but to accept ads either side of a song is just absurd.

Despite this, Pandora.com have recently started trialling pre-roll audio ads. Apparently, over 100,000 people heard the ads for McDonald’s — and it seems not one of them thought it was a great idea.

What a surprise.