2008: The Year of Free

This time last year I predicted that 2008 would be ‘The Year of Free’. (Targeted legal free that is, not the ‘let’s give it all away and hope for the best’ flavour of free I’ve been posting about here recently.) Though all music can’t ‘just be free’, free services are a crucial element of blended digital music strategies. As the year draws to a close we can see just how fundamentally the digital music market changed in 2008. (See the list of developments at the bottom of this post).

2008 was the year in which the music industry accepted the fact that the only way to fight free is with free. That the only way to engage young digital consumers that have grown up with file sharing is to offer them something genuinely comparable in experience and price (i.e. free). Back in 2005 I wrote in a Jupiter report that if the industry didn’t start offering these young consumers free music they would become a demographic time bomb for future music revenues. Now finally we’re seeing these strategies starting to happen.

Today’s announcement from TeliaSonera illustrates just how far digital music strategies have come since I wrote that report, but also how there is still much distance to go. TeliaSonera’s Telia Musik service will offer unlimited free music to all of its mobile and PC broadband customers across 6 markets for 3 months. Telia can expect robust take-up and to bring many new consumers into the digital music fold. But as soon as they start trying to charge for the service they can expect the vast majority of these new customer to go.

To paraphrase, Free is not just for Christmas, Free is for life. You can’t just use it as a loss leading customer acquisition tool. That both falls short of its potential but is also damaging. Free services are invaluable when targeted at specific target groups who are unlikely to spend anything. Target it at all consumers and it weakens overall perceptions of the value of music as a paid commodity.

Free should be a crucial element of multi-tiered digital music strategies, based upon sophisticated segmentation of the consumer marketplace, working on the underlying assumption that one size does not fit all. But equally sophisticated consumer life-cycle management is equally important to ensure valuable customers are migrated to premium offerings.

Here’s my Top Ten of the ‘the Year of Free’ (i.e. services that launched or had a key event in 2008 ) Let me know who you think I’ve missed but should have included.

2008: The Year of Free Top 10

  1. Comes With Music (UK launch)
  2. TDC Play (Danish launch)
  3. MySpace Music (US launch)
  4. Pandora (2 million iPhone downloads)
  5. Last.FM (downloads launch)
  6. Spotify (ad supported tier)
  7. We7 (Repositioning & relaunch)
  8. Telia Musik (Nordic & Baltics launch)
  9. Blip.FM (surge in adoption mid 08 )
  10. Qtrax (US label deals signed)

Advertisements