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RAIN 11/19: Industry considers future of ad-supported music as services suffer

Posted on: 11/19/2009


Those involved in, and observers of, online music industry are coming to the conclusion that free-to-use, ad-supported services simply aren’t working.

According to major label vet Ted Cohen (pictured), “the main problem centers around the minimums [that services pay labels for the use of music],” he wrote. “The economics just don’t work. A ‘mea culpa’, I was a big proponent of per-track minimum rates for both paid subscription and ad-supported services when I was at EMI. I WAS WRONG!”

The idea that current advertising revenue won’t come close to meeting the costs labels demand for licensing music isn’t new at all. And now labels and businesses may soon be reaching a point where something has to give.

MySpace Music is acquiring most of the assets of streaming music service iMeem, reportedly for around $1 million in cash. Both are struggling to meet the premiums they pay for the use of music. And the U.S. launch of European music-streaming darling Spotify is being held up by the major labels, which want the service to convert free-listening to subscription. “As an ad-supported service the economics don’t work at all,” a label spokesperson said. “They’re going to have to convince us they can convert enough people from free to paid subscriptions to make it worth our while.”

(While none of the major stories of the past few weeks directly involves non-interactive webcasting, the revenue/cost issues facing Internet radio likely have similar roots. This only emphasizes the need to address the issue of licensing costs.)

Cohen concludes, “It seems that the only way to achieve success for both the services and the rights holders in our current economic situation is through deals based on revenue-sharing that are structured with complete transparency. We need to break the cycle of mistrust, be bold, share the risk, share the reward.”

Read Eliot Van Buskirk at Wired.com here. Read Ted Cohen in The Music Void here. Read Michael Arrington in TechCrunch (and the Washington Post) here. Read The Financial Times here, and Radio Business Report here.


The BBC has made public more details of a radio player which will give users access to more than 400 commercial and BBC stations. See prior RAIN coverage here.

Davie gave a presentation at the Manchester Media Festival yesterday, showing mock-ups of the player, embeddable widgets for websites and a localised search function.The player will reportedly be “shareable” across social network services like Facebook, blogs and other websites. The Guardian reports, “Listeners will be able to search every station on the UK Radioplayer network, identifying news programmes, sports highlights, musical genres or even individual songs, using a new search engine designed for radio. Users can store their favourite stations on preset buttons.” Read more and see the slides (if you’re not in the U.S., or can “spoof” it) here.


Jelli’s Mike Dougherty, CEO of the crowd-source radio platform firm, appeared on CNBC’s “Squawkbox” this morning, interviewed by Erin Burnett at the Paley Center for Media. You can see the video here.

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