Tuesday, November 17, 2009

Can Freemium Content Model Survive?

Image Courtesy: HypebotFollowing last weeks' rumors about MySpace starting to charge for streaming and this weeks'MySpace-iMeem possible acquisition rumors, there's a lot of (repeating) talk about the business model of free content. Of particular interest is Wireds' post "Music: Too Expensive to Be Free, Too Free to Be Expensive".

Here's some of my thoughts, and what led me to start Adva Mobile
  1. Licensing Music from the majors is a difficult financial commitment to recover. If you're small and nimble, prove your bus model with the long tail, or at least the smaller players before paying the huge upfront fees. Sure, you gain (if you're lucky) the major's marketing wind behind your back, but when the honeymoon is over, you start paying. Another Wired writer's comment is almost (but not) funny: "In the world of online music, you're nobody until somebody sues you"
  2. "Advertising was supposed to be music’s magic bullet". Not. In all metrics, advertising payouts are dropping fast. Even on mobile, even when you can provide pretty accurate fan profiles, the payouts are way below your operating costs or licensing costs (if you have any).
  3. "Fans don't pay/Expect free". Not (again). As Debbie Chachra explained in her insightful post, fans will pay for relationships with the artists they follow in a number of levels. From tickets, hard goods to funding artist recordings, fans will pay for the experience that comes with the music. You just need to find a way to leverage those.
What's interesting in the entertainment space is that there seem to be no big winners in the game. Big problems = Big opportunities. That's what I'm banking on, anyway.

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