Why ad-supported music won’t work: blame the brands!
By Jakomi Mathews on Jul 15, 2008 with Comments 2
I’m sick and tired of new business models blaming labels and licensing rates for their woes when it comes to selling or giving away music by their businesses. Perhaps these ad-funded models need to convince their advertisers that giving away music and being associated with it is not as cheap as a traditional advetising model? As free music equals brand loyalty and this equates to more money and value for the brand and as such should cost more to the brand.
People like Lucas Gonze who contributes a column to SAI always blame labels and call themselves music entrepreneurs, yet obviously do not have any knowledge whatsoever of the economics of signing, nurturing, marketing and breaking an artist.
On the flip side I’m sure if it involved a brand or new ad-funded business model and their service or product the music business was wanting to give away for free, in turn offering to pay the brand or ad-funded retailer stupid uneconomical rates they would be up in arms, just like the record labels are when these supposedly “new” advertising funded models and brands propose non-viable rates to labels.
Music has value and the value of association with music is not to be underestimated. The brand and advertisers need to be educated of this fact. It is not the music industries job to educate brands, it is these new start up ad-funded models as it is their business not ours. If anything brands do realise this, and it is the lack-luster negotiation standards of these ad-funded business models which prevent them from adequately leveraging the value of the free music via advertising proposition.
Lets stop this continuous downward trend of further devaluing music, in the eyes of the consumer, the artist, the label and the brands. Advertising funded models can and do have a place along with numerous other models, but lets make it clear they need to be viable in terms of revenue for the content owner.
If your business is based around an ad-funded model and you cannot pay reasonable licensing rates for the music then quite simply you do not have a viable business! It may be viable for you, but it obviously is not for the music content owners. Without the content owners you do not have a business. My suggestion is come back when you do.
On a final note the web is peanuts compared to mobile. One example is; India where there are 1 billion people in India and only 2.1 million broadband connections. Yet their are over 260 million mobile subscribers growing at 9 -11 million per month. This scenario is the same in the majority of emerging markets who’s population more than doubles that of the western world. In Nigeria monthly mobile content APRU is $20 USD (That is higher then anywhere in Europe or the US).
If you want to think global think mobile! Mobile advertising revenues will explode in the coming three year time frame, and this perhaps may make ad-funded models a whole lot more viable…
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Filed Under: Business Models • Marketing • Uncategorized
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Great comment Steve.
I agree with most of your points except the advertising spend example. Giving away music for free and being associated with this has a higher value than traditional online advertising models. This needs to be communicated to brands and advertising funded music models alike. Music clearly adds brand loyalty and drives other long-term benefits for the brand over and above traditional advertising channels. This needs to be recognised by all sides. The debate, needs to be communicated both by the music industry, and the advertising funded models (perhaps in tandem) to the advertising and marketing sector generally.
Until this issue is examined at all levels their will remain an industry stalemate which benefits no-one except these brand marketing agencies and their clients. These, media agencies thrive on the disunity within the music industry on a global basis I’ve been on the front line of this in terms of brands advertising within core taste maker print and online publications.
Their is a significant cost associated with signing, marketing and breaking an artist whether they be via an indie or major label (this is generally before brands even consider becoming associated with artists). This needs to be taken into account with reference to brands association with music and specifically advertising. Brands use association with music/artists to shift many millions of their products or services. As such I truly believe that they see and value within that association yet I also believe they should be paying more for that dynamic association in terms of their advertising spend.
Perhaps they need to be educated with respect to the value that association with music brings to brands and the brand loyalty that generates?
My main problem is that I do not think the majority of these new ad-funded models leverage that brand/music association in a way that is economically viable to all parties in the process. In my limited experience brands do recognise the value of association with artists or music generally yet have not been properly sold on why the should pay a higher advertising budget (to their traditional £4 per 1000 to myspace for example). To have a specific association with giving away music for free and the net benefits that drives to their brand, any sensible brand would be amenable to paying more.
Lets address this key issue and I do believe their will be a serious uptake and investment wise from brands in music – we just (both the industry and these new models) need to provide a better ROI from a brand perspective to sell-in the benefits.
Cheers,
Jakomi
Hi
Good article, and I do agree the ‘blaming’ everybody culture for things that are not working needs to be parked whether its Brands Bands or Label. But after spending almost 2 years in building We7 and trying to bring themusic world and the ad world together there as some fundamentals that need to be addressed.
Firstly is not ad funded models that have seemingly devalued music, in fact in the ears of most consumers value music more than ever, there just has n’t been a series of viable delivery models that meet the their needs, so with that vacuum was filled by none licenced or P2P models.
Secondly, the advertising world works on very clear economic choices and that is the cost for a brand to reach x numbers of consumers to acheive y results. With the exception of a few experimental or one off high profile campaigns the choice for media planners is simple “which ad base activity maximises the impact for the brand for the smallest spend”. Media planners have a spectrum of choices and for any viable mainstream ad option the economics has to fit into the standard world. This is not devaluing music this is just stating a fact that if music wants to extract value and revenue from the advertising world they cannot ignore they are in competition will billboards, TV, Radio mags, T shirts etc etc.
I really feel that ad funded models for music have a great contribution to make to the music world but it is not in isolation, there is no long a single silver bullet but a spectrum of options to extract value, ad funded is just one of these and the more options there are the more we can money we can mine for the music world.
Cheers
Steve Purdham
CEO We7
http://www.we7.com