The Brooding Savage

The Unseen Risk in Ad-Supported Digital Music

(This is part 1 of a 2-part article on the proposed strategy of Ad-Supported music downloads.)

Poor music!  Several online sites are touting “free music."  Nokia added "free music" as an add-on commodity with their service in December.  It seems in the wake of failed music distribution models (iTunes remains king, which drives the labels crazy) the option is to just give the product away.  This is an irreversible trend, and I shudder to think what this will do to music as an industry.  

Music has become a commodity.  Blame the major studios for the way they develop and market artists. Music should be considered an art form, but who thinks of Amy Winehouse’s new CD the way they would a recent gallery exposition?  Let’s face it – in the music business there are artists and there are stars.  Stars have traditionally driven revenue, but in the process have cheapened the end product for everyone.  As a result, both artists and stars see the retail value of their efforts evaporate.

Why?  Because the value of a commodity is set by it’s lowest cost provider.  If a widget is sold for $10 at WidgetWorld, and $12 at Widgets-R-Us, consumers will conclude that widgets are worth $10, and Widgets-R-Us is overcharging.  (The happy alternative may be that consumers decide that WidgetWorld is actually selling below the actual value – what most would define as a “bargain.”)  The consumer attitude is reinforced over time, and becomes engrained with every competitor who matches the offer.

And so the deaths knell for music.  

There’s now a bevy of free, ad-supported music services emerging, including CBS' Last.fm, Spiralfrog, imeem and Qtrax. The message to consumers is clear: Music is an add-on; it has no retail value of its own. With each new service, the $0 price point is reinforced and music becomes swag – like logo embossed ballpoint pens or branded refrigerator magnets.   

Maybe this evolution is natural – after all, it’s often been pointed out that recorded music has a zero marginal cost to produce (meaning that every additional MP3 produced by a record label costs no more than the original recorded track.)  Proof of exactly how cheap it is to produce music is the billion MP3 files each month that are created via P2P sites, mostly illegal.  How can consumers really be expected to pay $1 for a product they know costs nothing to produce?  

The move to ad-supported music downloads is intended to counter rampant peer-to-peer piracy.  But the strategy may have an unintended side effect. If something has no retail value, what’s the harm of grabbing it free when the opportunity arises?  Some Gnutella users may have thought twice about downloading pirated tracks (not that it stopped them).  But what’s the harm now?  It’s all free.