Sunday, May 2, 2010

Breakthrough for Ad Supported Music

A UK music streaming service, we7, had its first profitable month – where on demand music was paid for in full by advertising. This most likely makes we7 the first company to demonstrate that a music on-demand ad-funded model can be profitable and still return measurable royalties.

The company states that one million plays on we7 generates payments to the music industry of between $3,100 and $6,200. These payouts “dwarf previously reported competitive models, especially revenue share models which shift the risk to the artists and songwriters.”

There is a long list of companies, Lala among them, that have failed to make ad supported music profitable. So what makes we7 different? Part of it might be their model of controlled growth, but a larger part of it could definitely be that record labels that given it reasonable terms and time to experiment.

Simon Wheeler, Director of Digital at Beggars Group, says “with the emergence of new digital models, it is important that they are given opportunity to develop and grow, but with a clear understanding that music has a value which needs to be recognized and paid for.” The CEO of we7, Steve Purdham, agrees “music has never been a ‘freemium’ model – they key going forward is protecting the value of music with smart economic delivery.”

If we7 can maintain its profitability, it could be a breakthrough for ad supported music and it would mean that the music on-demand ad-funded model can work – it just needed time to find which variation worked best.


-Emilia Segatti

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