Can Free Music and Profits Coexist?

A recent article from The Tennessean:

Sarah Sidwell, a 19-year-old freshman at Belmont University, loves listening to music but doesn’t buy it that often. Instead, she listens to top artists on Pandora, a free online radio station that she customizes to play her favorite songs.

It’s a phenomenon adding to the overall decline in music buying and even the legal and illegal downloading of tunes, according to New York-based NPD Group, a research firm. Instead of buying music, many consumers stream it online without ever opening their wallets to pay artists or record labels for their work.

With tens of millions of dollars in revenue at risk, music labels and musicians in Nashville have been scrambling to find new ways to make money at a time when sales are shrinking and digital downloads haven’t managed to fill the gap.

Adding to the challenge is the fact that more music is becoming available for free.

“Just as music piracy and the advent of digital music ended the primacy of the CD, we are beginning to see new forms of listening challenge the practice of paying for music,” said Russ Crupnick, NPD’s vice president and senior industry analyst.

Teen and young adult consumers increasingly stream their favorite artists on MySpace pages, listen to music over online radio while doing homework or preview an artist’s CD via an online music service before the album’s release date — all without paying a penny.

“The need to buy has diminished because (music) is so accessible,” said Heather McBee, vice president of digital business at Sony Music Nashville.

Web offers samples

Virtually all record companies and artists are trying to target music fans more aggressively on the Web.

For example, country music star Keith Urban is marketing his album Defying Gravity, which hits stores Tuesday, using iLike, an online service that lets users tell friends what music they like and track concert dates.

Since March 17, Urban has exclusively revealed a song off his album each day, along with a video explaining the song. Consumers can click on a link directing them to iTunes to purchase the song for 99 cents.

“We’re specialized for music,” said Ali Partovi, CEO of Seattle-based iLike, adding that his Web site is designed to drive sales. Partovi said even though his company is not yet profitable, about 60 percent to 70 percent of revenue comes from national brand advertising. He declined to provide annual revenues.

Urban has promoted past albums and tours on iLike. One benefit of using the Web site is it provides statistics for artists showing how many people streamed the album or checked out Urban’s profile, said Genevieve Jewell of Borman Entertainment, which works with Urban’s management.

ILike has a universal dashboard that pushes content out to other channels such as Facebook, Orkut or Ask.com, allowing Urban to reach more fans than the average social networking site can reach on its own, Jewell said in an e-mail.

“It’s hard to exactly pinpoint how successful this campaign will end up being, but I think the percentage of sales that end up being digital will be a good way to measure the success,” Jewell said.


Sites not profitable

ILike was one of several online companies telling music industry executives about their products at Leaderhip Music’s Digital Summit, an industry gathering held last week at Belmont University. Several participants from Oakland, Calif.-based Pandora to iLike said they were not yet profitable, but they hoped to win more advertising dollars from music companies and artists.

“This is the best way to find out about their music,” said Tim Westergren, Pandora’s founder. “Supporting services like ours help” musicians and record labels grow.

Westergren said there are 25 million people registered on Pandora, and the number of users has doubled each year since its founding in 2000. According to Pandora’s own survey, about 45 percent of users say they are buying more music after using the service.

Last fall, music publishers and songwriters also won a share of revenue from online and satellite radio services, including Pandora and Rhapsody, in a bid to make peace with what had been rival methods of getting music to consumers.

Still, music companies say they are evaluating where and how they should release new songs to maximize moneymaking and publicity needs.

“Is our music too accessible? Does that prevent me, the consumer, from having the obligation and desire to purchase the music? That’s an ongoing discussion on every single product,” said Ashley Heron, senior manager of marketing for Lyric Street Records.

Heron said outlets such as Pandora help introduce new artists and push existing fans to buy older songs from their favorite musicians.

But some companies are picky about which songs they stream for free in a bid to encourage more sales of newly released albums. For example, fans can only stream at no charge a roughly 30-second clip of the song “White Horse” on MySpace Music from Taylor Swift’s latest album, Fearless.

“They decided to protect their commercial asset of the current CD,” Heron said, referring to Swift, who ranked as the top seller of albums and finished in second place among all artists for digital sales last year.

“Initially when everyone is excited about the new release, you have one song as a teaser,” said David Herrera, an associate professor of management at Belmont University’s Mike Curb College of Entertainment & Music Business.

That’s a strategic decision to help boost CD sales, he said.

Troy sings for the Sims

Other artists are letting companies license their songs in popular video games such as Rock Band and Guitar Hero, in a bid to capture more fans, but it’s hard to measure how much profit the exposure brings.

In some cases, recording companies and their artists receive a one-time licensing payment to have a song featured in a game, while music publishers also may get a payment.

For example, Cowboy Troy recently recorded his song “I Play Chicken With The Train” on The Sims 2 Pets, a game that allows users to create their own virtual world. He had to rerecord the song into the gibberish language the Sims speak called “Simlish” for it to be played in the game’s jukebox.

Cowboy Troy, also known as Troy Coleman, said he believes the exposure helped him reach a new audience, especially ones who don’t typically listen to country music.

“I don’t know if game sales have spurred my CD sales,” Coleman said. “I trust, at least they’ve garnered fan interest.”

Record companies also are boosting music sales by selling songs online for video games like Rock Band. The additional songs available for download allow players more options when they strum electronic guitars, hit toy drums or sing along.

Rock Band has sold more than 30 million song downloads since November 2007, with a percentage of sales going to the artists.

“People don’t stand still that long anymore. You have to hit them from all different places when it comes from multiple impressions,” said Steve Schnur, worldwide executive of music and marketing for Electronic Arts and president of Artwerk Music Group. Electronic Arts is one of the makers of Rock Band and the sole developer of The Sims 2 Pets.

Keith Lowen, a 28-year-old social worker and bassist in a band called The Privates, spent about $75 downloading an additional 40 to 50 songs to play on Rock Band. Lowen describes his real life four-member band as “garage rock but smarter.”

The game pushed him to download songs he wouldn’t typically listen to, such as a $10 song pack from the Canadian band Rush.

“It’s just not music that I would listen to for pleasure,” Lowen said. “But it’s fun to play along with because it’s over the top and kind of ridiculous.”

Still, experts say that the music industry still has a long way to go in changing its business model to adapt to a growing digital environment.

“The question is, how do you make money for free?” Herrera said. “By building the brand awareness … you can still capitalize on that.”

Wendy Lee can be reached at 615-259-8092 or wlee@tennessean.com.

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One Response to Can Free Music and Profits Coexist?

  1. Pingback: Can Free Music and Profits Coexist? | Planet of Rock Blog

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