Music Downloads: Do Frogs Eat Apples?

Thank goodness Hurricane Ernesto was a dud; Floridians deserve a break from hurricanes and the rest of us are certainly not starved for hurricane coverage. As this storm's demise became obvious the cable news teams must have scrambled for alternative stories and maybe this prompted CNBC to air an interview with the CEO of a new company called SpiralFrog this past Tuesday. I didn't pay much attention at first, but since part of my job at ICMediaDirect.com entails staying on the lookout for new avenues of interactive advertising and SpiralFrog intends to deliver advertising through where none exists now, I took special notice.

SpiralFrog has an interesting plan and one that's generating interest as advertising dollars continues to migrate towards the Internet. This web-based company will let advertising fees essentially pay the freight of free music downloads for end users. SpiralFrog just signed an agreement with the world's largest music company, Universal Music Group, for access to their whole catalogue, an impressive feat for this new company. Should Apple, with their charged iTunes music, be threatened by these guys?

During this interview Robin Kent, the company's CEO, said he intends on fufilling the online advertising dream - to "monetize the unmonetizable", a phrase he used more than once. I admire his ambition, but this task may prove easier said than done. Low-cost and free options available to end-users of the Internet must certainly frustrate big online media companies. The Internet's experience shows that time and again when given the choice between free and paid content, end-users choose the free option. Is SpiralFrog's offering, then, too good to be true? I mean, what's an advertisement or two for free music, right? Additionally, these downloads will be 100% legal and free of unwanted adware and spyware. Remember, ads don't keep us from watching "24" or "Desperate Housewives".

This may sound terrific, but here are the challenges: 1) these downloads will not be iPod compatible because they will be of the Windows Media Audio (WMA) variety and SpiralFrog users will not be able to make copies of their music. 2) Downloaders will have to sit through monthly bouts of advertising for their music. 3) Mr. Kent described his target audience as the young Internet-savvy crowd that is already not interested in iTunes (thus, SpiralFrog does not pose a direct threat to iTunes success); but being savvy is not a coincidental condition and these elusive targets may not care to sit through mandatory advertising, either. If they can already get free music illegally and without consequence, they might not be lining up to listen to ads.

It would be wise for us in Internet advertising to keep tabs on SpiralFrog's progress because they will be attempting to harness revenue from the huge inventory of free and legal music downloads. The question is will the considerable inducements to use SpiralFrog outweigh the disinclinations not to? Runaway success could mean that Apple would have to change their own successful format, whereas mild success might only serve to encourage challengers to Apple's kingly share in the downloadable music space, possibly Microsoft. And then there's the real possibility that SpiralFrog will be a study in frustration for having gone after a user segment that's already satisfied with illegal downloads. It will be interesting to watch.

Joseph Pratt Media Analyst TEL: 212-563-6455 Email: joseph@icmediadirect.com ICMediaDirect.com www.icmediadirect.com