Evreryone’s Going Crazy About the Frog

Universal Music are reportedly backing a new ad-supported free music service SpiralFrog. This is innovative but not entirely new – it is part of a broader development of the music industry becoming more experimental and broad minded with digital music. See also EMI / Mashboxx, Snocap and all the majors settlement with Kazaa. Developing ad-supported free music services is actually something we have been telling the music industry they should do for some time now (see this report for more details).

Why is it so important? Primarily because younger consumers are still voting with their feet in favour of illegal services rather than the legitimate offerings. Jupiterís European consumer survey results show that illegal services significantly outweigh legal services across the board, but disproportionately so among under 25s (by a factor of over 5 to 1). If the music industry canít stem this tide then there is a very real risk that these music fans will ever develop meaningful paid music consumption habits when they develop stronger spending power in later life. As Iíve said before, if the industry is unable to convert this key demographic then the current global downturn in music sales would look like a blip compared to the gaping hole that would emerge in 10 yearsí or so time.

So itís great news to hear that the music industry is being innovative. Is this a threat to iTunes Music Store? Well, the market is at a very early stage of development so this is just part of the natural progression of the market maturing and diversifying. Also, Appleís dominant market share means that there is only one likely direction for that share to go: down. That isnít to say its revenues will stop growing, simply that the rest of the market will grow. If, however, the free services decide to adopt WMA then it could be an issue. What would be really brave would be for this generation of free services to adopt MP3 as their standardÖ.which is already the de facto digital music format.

Will the SpiralFrog service work? That all depends on whether they can get the right content and grow a good audience. Advertisers buy access to audiences. Without a good audience there wonít be an appealing proposition for advertisers which means no viable business model.