SayNow Connects Audio Ads and Music Choice

I was just reading VentureBeat's coverage of a company called SayNow (they were offline at time of posting).

VentureBeat describes what the company does as follows: the service offers bands a dedicated phone line, allowing them to leave a voice message for their fans. The musicians do this by placing a widget on their Web site, listing a unique phone number. Fans can call and listen to the message, leave messages for the band, and register to get updates. The musicians can give the number out at concerts — and the one-to-many relationship is made very easy.

The company's revenue is earned from selling audio ads included in the bands' messages. I like the use of audio advertising and connecting it with the music preferences of the listener. This can imbue the ad with relevancy and a positive emotional connection.

Of course, this is what ad-supported downloaded music can do, and on a much larger scale.

Swiscom Offers Ad-Supported Music Videos

The Swiss mobile carrier Swisscom has announced an ad-supported streaming music video service.

This brings up a few thoughts for me:

1. I assume the ads will be videos also. I don't get the allure of cellular phone video ads to providers. The cell phone is an audio device. See this post.
2. At least they recognize the advertising value of music. As I wrote yesterday, Nokia doesn't seem to be aware of this opportunity. In fact there is this interesting comment in the press release: "Music is what helped MySpace reach critical mass in the early days of online social networking, and with more mobile devices than PCs out there now, the possibilities in this space are even greater.”
3. Mobile streaming solutions for advertising supported content are very limiting in my view. They really only work for subscribers with an unlimited data plan. I don't think the ad-supported model works at the a-la-carte rate carriers charge for data transfer.

Oy Vey its Ovi

Today Nokia introduced its well-named - in Finland - Internet service. It is called Ovi, which means door, in Finnish.

According to the press release:

Nokia today introduced Ovi, the company's new Internet services brand name. With
the introduction of Ovi, Nokia is expanding from a focus on mobile devices to
offering a range of Internet services. Ovi, meaning 'door' in Finnish, enables
consumers to easily access their existing social network, communities and
content, as well as acting as a gateway to Nokia services. As part of Ovi, Nokia announced the Nokia Music Store and N-Gage, two services that make it easy for people to discover, try and buy music and games from a blockbuster range of artists and publishers,

Just about a year ago, Nokia acquired Loudeye. According to the acquisition announcement:

People should be able to access all the music they want, anywhere, anytime and
at a reasonable cost. With this acquisition, we aim to deliver that vision and a
comprehensive music experience to Nokia device owners during 2007.

Ovi is launching in Europe, where users will be able to download tracks to their phones for 1 euro, which is about a buck forty.

Thrilling! Unique! What an amazing experience Nokia has crafted from the Loudeye acquisition!

Now, having removed my tongue from my cheek, I can say that it appears Ovi offers nothing new to mobile music.

If anybody from Nokia is reading this, please take a few minutes to read the following posts also:

• From yesterday, remember, no amount of product improvement could save the buggy whip.
• One euro is a nice round number of an OTA track, but did you forget that people want their music for free?
• From June 8, ad-supported music is a great way to bring advertising and free music to cellphones.

Music Industry - Crack, er, Cast Off Your Whips

The notion of the buggy whip industry as the archetype of a dated, dying business has entered common parlance. The buggy whip example was made famous by Professor Theodore Leavitt in his seminal Harvard Business Review article; Marketing Myopia.

The article was published in 1960, but its thesis is timeless. If you haven't read it, do so now.

Here is how Leavitt describes the buggy whip industry:

The classical example of this is the buggy whip industry. No amount of product improvement could stave off its death sentence. But had the industry defined itself as being in the transportation business rather than the buggy whip business, it might have survived. It would have done what survival always entails, that is, changing. Even if it had only defined its business as providing a stimulant or catalyst to an energy source, it might have survived by becoming a manufacturer of, say, fan-belts or air cleaners.

Most of you probably already know where I am going with this - the recorded music industry is in danger of suffering the same fate as buggy whip manufacturers.

"No amount of product improvement could stave off its death sentence". So, DRM - irrelevant, selling music through a music recommendation site or at Starbucks - irrelevant, adding extras to a CD set - irrelevant, social networking around music - all irrelevant.

The only thing that will save the recorded music industry is changing its focus from selling music to selling the time spent listening to music.

This, of course, means abandoning the consumer supported business model and adopting an advertising supported business model.

For some reason this reminds me of the following quote from Woody Allen (except in our case the ad-supported path leads to salvation):

More than any time in history mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.

More TSL Data - This Time Anecdotal

Today I will point you to the INSIDE MUSIC MEDIA™ blog written by Jerry Del Colliano. Jerry is a radio industry veteran who now teaches at USC.

He put up a post today about the summer media habits of his students. Basically, the students didn't spend much time with traditional media, however:

They spent a lot of time listening to their iPods -- but you knew that, didn't
you? Time spent listening to iPods, if you will, hasn't declined as far as I can ascertain.

Yes, those who have been reading this blog, especially this post and these posts, knew that young people spend a lot of time listening to their portable digital music players.

Readers will also know that this blog is all about the great untapped advertising opportunity this time represents.

Audio Equivalent to Video Overlay Ad Format?

There has been a lot of news and blogging about the introduction of advertising on YouTube as well as the format of the ads.

The ad format is called an overlay and here is a picture of the really inadequate explanation provided on the YouTube advertising page:





Here is a better description from howtodovideo.com:

Here’s how the new overlay approach works, according to Google:

* 15 seconds into the video, an overlay ad appears on the bottom 20 percent of a video.

* The overlay animates for up to 10 seconds and is 80 percent transparent* The overlay then closes automatically.

* A user can replay ad by clicking button

If the flash ad is clicked, the video stream stops, a “picture within picture” window
is launched and a full video ad plays (no specified duration). After the user
finishes viewing the ad, the window closes and the primary video resumes. Google
will be reporting click-throughs to advertisers and the duration the
accompanying ad plays.

I think the video overlay is a great approach. It is intrusive, as all advertising must be, but it is presented concurrently with the content, which I like. There is nothing original about this approach, we see it on television all the time and VideoEgg claims to have originated it on Internet video.

Anyhow, this has got me thinking about whether there is an audio equivalent to the video overlay ad format? Any ideas? If such an audio equivalent could be developed it would be an effective format for ad-supported music.

MP3 Players are #1 Device Worldwide

IBM published an interesting study yesterday on the digital and media behavior of consumers in five countries. Reuters has a nice summary here.

The countries surveyed were: the U.S., the U.K., Japan, Germany and Australia. You can get the survey results here.

One of the survey questions was about device ownership. Here are the results:

The number 1 device in every country is an MP3 player. MP3 players are used to listen to recorded music. If advertising is about reaching people with a message; doesn't advertising supported recorded music become a no-brainer with evidence like this? I think it does.

Low Price Wins in Toilet Paper and MP3s

Yesterday was a big new music news day. First there was the MTV URGE will merge announcement, which was the subject of yesterday's post.

Second there was the announcement from Wal-Mart that it would begin selling 256 kbps DRM-free, MP3s from Universal and EMI for $.94.

Wal-Mart is the largest general retailer and music retailer in the country for one reason - low prices. Wal-Mart has this position in music retailing because it sells so many CDs. The interesting thing is that its CDs are usually only about a dime, or less than 1%, cheaper than competitors.

Wal-Mart is taking the price competition to a new level with these DRM-free downloads. The price for an equivalent track (256 kbps, DRM-free) on iTunes is $1.29. So Wal-Mart is now almost 40% cheaper than their main competitor.

But wait, there's more. Wal-Mart achieved its dominance in music retailing even while selling only clean versions of the most popular music.

There are many valid conclusions that can be made from these facts. The conclusion that I draw is that, even in the world of music where people buy on emotion, low price is a powerful motivator. The lower the price the better and free is best of all.

In fact, if the price is right people are willing to put up with degradation in their music experience - for example, editing explicit lyrics.

So, I'll draw another conclusion - people will accept appropriate ads in their downloaded music listening experience if the music is free.

MTV Needs a Bigger Box

MTV has made news in a couple of areas of interest to this blog.

First, the Wall Street Journal reports (also reported here) today that MTV is merging it's URGE download store/streaming service with Rhapsody under the moniker Rhapsody America.

Second, last week MTV announced that it was investing $500 million into gaming initiatives. Judy McGrath, the CEO of MTV, had this to say:

"As we take our brands narrow and deep to serve our targeted, niche audiences,
we're putting well over $500 million behind building our games business across
all of the brands in our portfolio. I'd like to see more game applications on
some of our current big brands across the music group."

What is MTV? From a fundamental business perspective, MTV is a brand vehicle for selling advertising.

Could a greater involvement in gaming help MTV sell more advertising? Perhaps some, but I don't think gaming will ever be as big an advertising market as it is being hyped to be (this article from Mediaweek presents a good overview of the problems).

Could a greater involvement in downloaded music help MTV sell more advertising? Definitely, but it seems that they are abandoning this space.

If the execs at MTV consider these moves to be "thinking outside the box", the box they are thinking outside of must be very small.

A Perfect Storm for Ad-Supported Music

Last week Henry Blodget put up a great post on Silicon Alley Insider entitled: The Great Ad Share Shift: Google Sucks Life Out Of Old Media.

Read the post and the accompanying data sheet.

The significant top-line finding is:

US advertising revenue at 4 big online media companies--Google (GOOG), Yahoo
(YHOO), AOL (TWX), and MSN (MSFT)--grew by $1.3 billion in Q2, or 42%. US
advertising revenue at 15 big television, newspaper, magazine, radio, and
outdoor companies (Time Warner, Viacom, CBS, etc.) shrank by $280 million in Q2,
or 3%.

Blodget concludes that media power is shifting by medium, not within medium, and that power is now shifting to the Internet.

I agree with Blodget but would add this conclusion: media power is fracturing. Whereas advertising used to be concentrated in TV, radio and newspapers, in the future there will be a dozen or more "top" advertising media. Internet advertising will continue to grow but will never achieve the dominance held by TV advertising.

This is simply a function of the growth in media choices. People spend their media time at more places and advertisers will follow them there.

A parallel shift is occurring in recorded music. CDs dominated recorded music for a couple of decades (Happy 25th CD!). Then MP3s and iPods came along. Now people have a variety of choices for acquiring and listening to recorded music. No single format will ever again dominate recorded music to the extent the CD did.

In a profound way these parallel evolutions - one in advertising and one in recorded music - create the perfect storm for advertising supported recorded music.

Ad-supported music becomes one more option that offers value to consumers and advertisers in a fragmenting media world.

Year of the Free? Be Brave, its Coming

In January, Jupiter Research analyst Mark Mulligan declared in a post on his blog that 2007 would be the "year of free", ad-supported music. I commented on that prediction here.

A couple of days ago, Mark put up this post:

I laid my cards on the table at the start of the year and claimed that 2007 would be ‘the year of free’ for digital music i.e. that ad-supported music services would make important gains. So far that hasn’t proved to be the case. Now, whilst I could try to shift the blame to the nascent services being hamstrung by the scale of label license fees I’ll instead remain foolishly optimistic about the remaining months of the year. Time for a wildcard scenario: what if Apple were to, say, respond to a newly launched Nokia offering with an ad-supported initiative? Perhaps even linked up with a European iPhone launch? Wild conjecture? Quite probably….

No Mark I don't think we will ever see an ad-supported offering from Apple. At
least not while Steve Jobs is there.

We can predict with certainty that ad-supported music will happen, we just can't predict when. But when it does start, it will usher in, not the year of the free, but the decades of the free.

yourfreemusicdownloads, get it while you can

From Our Digital Music, I learned about a new free music service today, called Yourfreemusicdownloads.com.

Here is a description of the service from the press release:

All songs in the Your Free Music Downloads.com catalogue are in MP3 format and
are completely portable as they contain no DRM (digital rights management)
restrictions. With no DRM restrictions, registered users of Your Free Music
Downloads.com can listen to any downloaded song where and when they want and on whatever device they choose. Free music downloads can be played on a computer, on an iPod or any other portable media player.
Your Free Music Downloads.com is an ad-supported free music download site with a catalogue of over 1,000,000 legal MP3 songs that is currently growing by 500 songs a day. Unlike other ad-supported free music download websites, Your Free Music Downloads.com does not embed ads within the music or before or after each selection. Instead, when registering, users are simply asked to complete a short survey that generates revenue for Your Free Music Downloads.com.
Unlike other free music download sites, Your Free Music Downloads.com does not restrict the way registered users listen to their free music downloads by requiring special software to be used. Registered users only need to download the music they want and press play.

There is no way that just selling survey answers can generate enough revenue to fund a free music service. There must be some other affiliate marketing type play here.

I wouldn't call this an advertising supported music application but I would call it doomed.

Comment on an Excellent Comment

I'm a bit under the weather today and don't have the energy for a full post. I am going to reprint a comment I just got on my post See the Light From Cameraphones!

This is the comment from anonymous:

This actually is a blatant misuse of "statistics" to try to support a point
that is actually false. Over these same years the number of camera phones grew
in the US so dramatically that even with the declining percentages, the actual
number of people sending photos rose significantly - here is my estimate with
some supporting data: Here’s some other data:M:Metrics says that the number of
cameraphone owners has climbed to 106 million in the United States, crossing the
50% threshold (51% in Feb 2007 – so we’ll call that 2006)The Yankee Group says
53 million camera phones were sold in the U.S. in 2005 compared to 22 million in
2004.About 30 million U.S. camera-phone owners took photos with their camera
phones as of October 2005, compared with 16.7 million in November 2004,
M:Metrics estimated."So, if you overlay the percentages with some of this data
for the last three years (using the data that about 80% of camera phone owners
take pictures with them.)2006 – 24% of 106M = 25M people sent photos2005 – 28%
of 40 M = 11M people sent photos2004 – 36% of 21M = 8M sent photosI’d say that
is pretty much exactly opposite of the point the author wanted to make.

This is an excellent, well researched and presented comment. However, it is not the opposite of the point I was trying to make.

As the commentator points out, more people are using camera phones to send pictures but the declining percentage of owners doing this shows just how much potential revenue carriers are leaving on the table. The point I was making, and still stand by, is that if carriers rely on OTA downloads for their share of music listened to on cellular phones, they will be limiting themselves to a very small slice of the pie.

Why Would an Advertiser Use Ad-Supported Music?

Yesterday I addressed the question: Why Would Anyone Listen to Ad-Supported Music?

Today I would like to look at the corollary question for advertisers - Why would an advertiser want to advertise on downloaded music?

Like yesterday this is a countdown list; the lower the number the more important the reason:

Reason # 5: Mother lode of new ad inventory – TSL to downloaded music is a major activity for all consumers, especially young people. Advertising supported music opens to marketers more than 100 billion hours, of consumer media time spent with downloaded music.

Reason #4: Detailed tracking and reporting – Any good ad-supported music application will take advantage of synching to track: which ads were played, demographic details of users who played them, when they were played and between what tracks of music they were played.

Reason #3: Ads delivered over an intimate medium – Ads are associated with a listener’s chosen music, delivered through headphones when the listener is closed off to rest of world (This is the great power and great risk of the medium. Ads and associated content can enhance the listening experience if done properly and ruin it if done improperly.)

Reason #2: Precise targeting – Any good ad-supported music application should be capable of targeting ads to at least: age, gender, zip code, music genre, artist, album and track.

Reason #1: Reaching their targets – As consumers' time spent with media is spread among more options, they become more difficult for marketers to reach. Ad-supported music enables advertisers to reach targets through cellphones and MP3 players.

Why Would Anyone Listen to Ad-Supported Music?

On Friday I had an illuminating colloquy with an anonymous commentator (you can check it out here).

The commentator pointed out that music is very personal and expressed the feeling that people,therefor, wouldn't want their playslists interrupted by ads. This made me realize that I never explained in this blog why a listener would want advertising supported music playing on their cellphone or MP3 player.

So here is my explanation. This is a countdown list; the lower the number the more important the reason:

Reason #4: Advertising-support is not an all or nothing proposition; it is about choice - In every other media, the consumer has ad-supported options for free or, lower priced, content. Ad-supported tracks bring this choice to recorded music. A good ad-supported music application allows the listener to mix ad-supported and paid tracks in the same, or separate, listening session and controls ad play around paid tracks. So a listener can have: playlists of tracks they purchased during which no ads are played; playlists of tracks that are all ad-supported, which is maybe a music discovery playlist; or playlists of tracks that are both ad-supported and purchased.

Reason #3: Advertising doesn't have to be annoying - Ad-supported downloaded music will not work if the advertising is just recycled radio ads. This is a new, highly personal medium that requires the development of new ad formats. Among the formats that are possible are: interactive audio, audio-visual, highly targeted ads; including ads targeted to the music being played, and sequential ads. Advertising supported music ads will be intrusive, but they do not need to be annoying.

Reason #2: Advertising and related content can enhance the music listening experience - A good advertising supported music application will provide more than advertising. It will provide content around the music that is targeted to the music. This content can include: artist interviews, previews of new tracks, concert announcements, etc.

Reason #1: Advertising supported music is free - If you forget everything above, the number 1 reason people will listen to downloaded music with ads is because the music is free. Listeners with the resources to purchase any music they want have the luxury to refuse ad-supported music. The vast majority of the music listening public doesn't have this luxury.

Wrong Way on Amie Street

Amazon recently invested in Amie Street. Amie Street has received a lot of coverage focusing on their dynamic pricing model for digital music.

Here is how they describe the model to artists: "Amie Street gives fans the incentive to discover and purchase your music through our unique pricing model. All songs on Amie Street start free and rise in price up to 98 cents based on the number of times they are bought. The first several downloads of your songs are free because this encourages fans to experiment with your music even if they haven't heard of you. "

This would be a simple application of market pricing/supply and demand, except in the case of digital music the supply is unlimited. So basically, dynamic pricing is a gimmick. A gimmick, though, which works well to differentiate the site from the crowd of others selling indie music.

I have a model of dynamic pricing too. However, unlike Amie Street, my model operates to lower the price of music, rather than raise the price.

My model of dynamic pricing works like this: the more you listen to an ad-supported track the lower the price gets if you decide to buy it.

Each listen to an ad-supported track is an opportunity to present an ad and so is valuable to an advertising supported music company. Any properly executed ad-supported music business will log each time a listener plays a track. Using this information it is simple to create offers to convert an ad-supported track to paid at increasingly lower prices.

So, the Amie Street/Amazon dynamic pricing model raises digital music prices to the consumer. The ad-supported model lowers prices.

Which do you think will be more successful in the new world of recorded music?

Tantalizing Tidbits

Occasionally I want to write about some items that are not worthy of their own post, or I am too lazy to write a full post. So I am going to start an occasional feature called Tantalizing Tidbits.

Today's Tantalizing Tidbits:

1. Mark Mulligan is analyst for Jupiter Research. Mark covers digital media and writes a blog. I think Mark is a good analyst, but he had this paragraph in a post a few days ago: Yet more fodder for my perennial argument (yes I’ll keep ramming it down your throats until the music industry listens!) that the labels need to aggressively drive album and multiple track purchases online. Hasn't one of the major shifts in recorded music been the market showing that they want to purchase singles, not albums? Mark is suggesting that the record companies can reverse this trend? When could an industry ever reverse such a market tidal wave? Not very sound analysis or advice. What Mark should be "ramming down the throats" of the music industry is the lesson of his earlier post; Fighting Free With Free.



2. FRUKT, "a specialist music strategy and communications agency" in the UK, just published the results of a study on TSL to recorded music:

This data is relevant to my recent post regarding music on cellular phones and yesterday's post on the VSS survey.

VSS's Very Sweeping Survey

Veronis Suhler Stevenson released their annual Media Forecast yesterday. This is a comprehensive survey that is widely reported (many sources on the Net, I like this analysis from Mediapost).

VSS used to release detailed data from the report, now freeloaders like me can only get what is in the press release. Still I encourage you to read the release.

There are a few findings that I would like to comment on:

1. "For the first time since 1997, consumers spent less time with media in 2006 than they did the previous year, as media usage per person declined 0.5% to 3,530 hours, due to changing consumer behaviors and digital media efficiencies..." The report points out that this decline is due to increasing use of digital technologies. Part of this trend is increasing TSL to recorded music.
2. "VSS expects consumer media usage to stabilize in 2007 and increase slightly through 2011, as out-of-home media and videogames will be the only major segments to achieve accelerating growth in the forecast period compared with the 2001-2006 timeframe." Did they even measure TSL to recorded music? This medium tends to be forgotten.
3. "In addition to shifting their attention to alternative media, consumers are also migrating away from advertising-supported media, such as broadcast TV and newspapers, to consumer-supported platforms, such as cable TV and videogames. Time spent with consumer-supported media grew at a CAGR of 19.8 percent from 2001 to 2006, while time spent with ad-supported media declined 6.3 percent in the period." Makes sense. The gorillas of traditional media, which are ad-supported (radio, TV, print) are declining and this will have a significant impact on the overall number. Still, I think this is a misleading statement. Consumers are not shifting away from ad-supported media. They are really shifting away from traditional media to digital media. People are spending a lot of time at places like YouTube or music recomendation sites. These sites launched as free (and were free during the VSS survey period) and without a revenue model. As we see on YouTube, these sites are becoming ad-supported -they have to.
4. "Spending on alternative advertising – including Internet, mobile, videogames and digital out-of-home, among others – grew 36.6 percent to $26.53 billion in 2006 and posted a CAGR of 23.9 percent from 2001 to 2006. Traditional advertising spending, however, grew only 2.4 percent to $183.21 billion in 2006 while producing a CAGR of 2.8 percent." Advertising follows the consumer. Alternative advertising will soon become traditional advertising.

Consumers will always prefer their entertainment content free, regardless of the medium - old or new. Always bet on advertising supported content.

See the Light from Camera Phones!

When was the last time you sent a camera phone photo wirelessly? If you have done this at all, you are probably doing it a lot less than you used to.

I came across this amazing data yesterday:

In spite of what you might be thinking now, this information is not off-topic.

When camera phones were first introduced, carriers salivated at the thought of all the data charges users would incur by zapping photos back and forth. The data shows that at the dawn of camera phones, users took advantage of the novelty of instant picture sharing.

That novelty is wearing off and the data charges are vanishing with it. I don’t think people use their camera phones any less, its just that they are saving the pictures on their computers and the carriers aren’t seeing any revenue from camera phone use.

I think camera phones are a perfect parallel to music phones. We are at the dawn of cellular phones with MP3 players:

What are the carriers doing? They are salivating at the thought of all the data charges users will incur by downloading music OTA. Sound familiar?

Here is what is going to happen – actually it already is. People will download music OTA while it is a novelty then they will sideload all their MP3s to their music phone (sideloading is primary way to get music on a music phone). Just like people expect a camera on their phone they will expect an MP3 player, but the carrier will not see any revenue from the use of this feature.

OK, listen up carriers – here is how you avoid this from happening: create a world where cellphone music = free music. All MP3s on a cellular phone should be free to the consumer through ad-support. I have blogged before about how the cellphone is the perfect ad-supported music device.

Carriers can make a lot of money from music phones if they focus on TSL instead of data charges.

DRM Free Track Sales - Good, Bad or Ugly?

Today EMI released its: "Interim Management Statement for the 18 week period from 1 April to 6 August 2007". The press release has some performance results for this period.

In general the results are what you'd expect - CD sales way down, digital sales up. The line that caught my attention is the comment on iTunes DRM-free sales:

"In late May 2007, iTunes launched EMI’s DRM free products on iTunes plus. Early
revenue indications for this initiative are encouraging."

Back in June, EMI VP Lauren Berkowitz said DRM-free sales on iTunes were "good". Hmm, "good" then, "encouraging" now. What does this mean? It means that DRM-free sales have been disappointing.

Earlier this year there was a lot of reportage to the effect that DRM was killing the music industry. I wrote then that what music consumers wanted was Dollar-Free not DRM-Free music, and that DRM was just a distraction. Make the music free under the right business model (ad-support) and recorded music revenues will go through the roof.

Too early to say that I am right, but I am.

SIMM Stops Short

I am a bit of a data junkie when it comes to information on how people spend their media time. The firm BIGresearch just released it's tenth Simultaneous Media Usage Study (SIMM 10) of 15,439 consumers. SIMM is a study of how people use different media at the same time.

Here is a summary graphic from the study:

What media is missing from the study? The answer is recorded music.

The company describes SIMM as: "...a tool to understanding the inter-relationships of multiple media usage which impact marketing effectiveness and ROI of communications expenditures."

Recorded music is a major media. For teens and young adults, it is the #1 media they spend time with. I don't think this study is much help with "marketing effectiveness and ROI of communications expenditures", when they fail to acknowledge such a major media.

Apple and Ad-Support?

There are posts showing up in the blogosphere reporting that Apple may start an advertising supported download service on iTunes. Apparently the source of this rumor is a filing Apple made with the U.K. Copyright Tribunal:

The Tribunal's decision quotes witness evidence from iTunes VP Eddie Cue,
where he states that Apple would only pay advertising revenue where "that
revenue is earned as a result of an advertisement, sponsorship or a
click-through link located on a Licensed service … and only where the
Licensed Service is offered to the User at a price which has been
artificially depressed to reflect such revenue. (From Tech Digest)

Some more detail is provided in the MacNN post:

Cue later detailed the hypothetical service, suggesting he meant "placement of
third party advertising at the start, end or during actual delivery of a
Repertoire Work to a customer by way of a permanent download." This would
contrast with services such as Napster's "Free" site, where users can stream the music, but not keep it. Other advertising models have sometimes involved inserting ads into the media itself.

I am glad that they are considering a download service instead of a streaming service, but I don't believe that Apple will offer ad-supported music - at least while Steve Jobs is in charge.

$17 Billion; Does That Get Anyone's Interest?

The musicFIRST coalition just published a brief study of radio company economics. Most of you will know that musicFIRST is the group that is lobbying for legislation to require radio to pay performance royalties.

The study, done by economist Barry Massarsky, found that 80% of corporate radio revenue comes from music and that since 2001 music advertising revenue grew 15.5%.

The coalition's conclusion from this study is that corporate radio has sufficient revenue to pay performance royalties.

The statistic that sticks out for me is that 80% of radio revenues are from music. I knew intuitively that the majority of radio revenues were from music but never saw it quantified.

Radio advertising revenues in 2006 were $21.7 billion. Applying the Massarsky finding, we can project that $17.4 billion in advertising revenue comes from playing music.

So, from the listener's perspective, advertising supported music is already a $17 billion industry (can't say this from the industry/artist perspective since they don't see any of this revenue).

Remember, this revenue is coming from music that the listener can't choose. If that is the case, what is the revenue potential for advertising supported downloaded music? I won't be so bold as to say it is more than $17 billion, but it is huge.

Oh yeah, one other interesting note about the $17 billion number- it is about 40% greater than recorded music sales in 2006.