I have posted on my blog and have expressed strongly, many times, that companies that use music as a secondary driver (MTV, WalMart, Apple, etc..) will be far more successful then those that use music as its primary driver (Napster, Rhapsody, etc..).
Spiralfrog and it’s ilk, seem to fall into the former category. Use music to generate enough traffic and ad inventory to create real-estate to generate more money then they need to pay out. So in that sense I like the strategy. I would say, as an aside, it amazes me that the record labels insist on upfront fees and guarantees on revenue. Yes there are administrative headaches in dealing with small companies, reporting, etc… But IF (and that’s a big IF) Spiralfrog will succeed, they could probably use that money for better purposes – like marketing.
But back to the topic at hand. Anytime I review a business idea I look closely to see if it is a real business or just a product line extension or a marketing move. Someone once came to me with an idea for a BUSINESS to double the size of the little ketchup packets you get at fast food restaurants. Now granted, I love ketchup and yes I would LOVE bigger packets – but would I really want to compete with Heinz on this one issue. OR is this just an idea that Heinz should take under advisement.
In a previous blog I suggested that Yahoo would/should go free. They already generate most of their money from advertising – they have millions upon millions of users – they have everything one would need to put this strategy to play – in other words – this would be just a marketing concept they have all the other parts of the equation locked down. But Yahoo has not done this yet – why?
1) They do not believe they can make enough money in advertising to make up for the licensing, marketing, services, etc..
2) Advertising within a music store would be to invasive for the user to care
3) This must be a WMA deployment – no iPod support so who cares
4) Etc…
The most important issue is obviously #1. So, if Yahoo can’t do it, why do we think Spiral Frog can? I know I don’t.
