Why Advertising Sponsored Music Won’t Work
By Anna Johnson on July 14th, 2008Writing in Silicon Alley Insider, Lucas Gonze explains that ad sponsored streaming music services won’t survive unless they change their business model.
Here’s why: given that the major music labels want a penny each time a song (of about three and a half minutes) gets played… then, just to break even, a site will need to run one ad per song at the rate of one cent per ad. On a per user basis that adds up to an effective cost per thousand (CPM) of $10 which, Gonze argues, most advertisers won’t accept. He believes that $1 CPM is more likely what advertisers will pay.
Check out Lucas’ arguments here. The bottom line is that if ad sponsored streaming music is going to be viable, the music labels will need to lower, or at least change, their expectations.
In general, music labels need to make more effort to adapt to the Internet, i.e. where there is readily downloadable free music, if they are to survive themselves. As we previously reported, in the U.S. alone annual music spending per capita was just $120.03 in 2006… which is less than what it was in 1980 ($198.04)!
