The Daily Swarm

P2P Vet Wayne Rosso:

Q: Why hasn’t anyone cracked the ad-supported free model yet?

A: It boils down to the labels and their fees for streaming. Clearly it’s not going to happen if they don’t want it to happen and, based on their fees, they don’t want it to happen.

We cut a deal at a penny per play and I think we were on the right track five years ago. Even then the record labels wanted us to put in voiceovers to make copying the tracks less enticing but we were finally able to talk them out of it. Record companies have never cared about user experience, they care about money and that’s fine.

If you’re an entrepreneur building a service you’ve got to think about user experience. For Spotify it’s just not profitable to launch a free service in the US and the reason is the rates. There’s no way in this market at this time and for the foreseeable future that it could be supported advertising wise. I’m not an ad agency guy, I’m just a simple bigmouth but the reality is tough.

Robin Kent on Spotify and label ‘tudes:

Q: Is ad-supported music dead?

A: I think the overall picture is that it’s not really been tested yet. First. the internet advertising market has not gone in the direction that people have predicted. Digital might have overtaken TV ad spend in the UK but it’s a long way off from doing that in the US – perhaps a decade away. Everyone was predicting that by now the US would be getting to $40 billion, not $25 billion. So there has to be a paradigm shift in the type of advertising being used. Branded advertising has to make a major breakthrough. Until then it will be difficult for any site to attract big advertising at big prices.

Q: Why is there enough ad money to support some kinds of sites but not music services?

A: The problem with advertising is that the majority of the money goes to search – in the US 70% of ad dollars go to the top 10 sites – Google, MSN, AOL etc – and something like the top 89% of the ad dollar 25 billion goes to the top 50. So for a startup site to be able to deliver significant ad dollars is impossible regardless of what types of models.