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A Word From Our Sponsor…Can Ad Money Mend The Record Business?

10th May 2007 @ 7:30 pm - 10:00 pm

Venue: Private Room, Bertorelli Bar & Restaurant

TOPIC

Global advertising revenue is worth approx. $67Bn.  And the fastest area of growth is online, with the Interactive Advertising Bureau reporting that internet ads brought in $4.3Bn in the third quarter of 2006 alone – an all-time high and a year-on-year increase of 33%.

As the iPod generation’s online activities of choice (video streaming services, social networking sites, mobile communities, P2P etc.) become increasingly mainstream – just think Murdoch’s deal with MySpace and Google’s buyout of YouTube – it seems inevitable that ever more advertisers will look online, bringing with them an increased slice of that $67Bn.

The likes of AOL, MSN and Yahoo have been sharing ad revenue from the streaming of at least some labels’ music videos for over a year, and YouTube has deals in place with most of the majors.

But while asking for a share of ad revenue for online streaming uses is perhaps a no-brainer (with some label executives confident this could bring in 15% – as much as their existing synch-publishing revenue), could online advertising ever bring in enough to support the music industry’s core business of delivering music to consumers, for keeps?

With existing pay-per-track download services already finding trading conditions tough despite receiving 79p per download, is it really conceivable that a service could derive enough money from advertisers alone to support giving away music for free? EMI and Chinese search giant Baidu have formally agreed to explore the development of such a model, but is this just a case of cutting losses in a market with 97% piracy? In the western market, is the impracticality of the ad-funded model what led to the apparent implosion of SpiralFrog?

Or do we simply need more transparency, more flexibility from service providers and labels alike, in order to make the ad-funded model work? Upcoming services such as Qtrax are confident that an ad-funded P2P-based system can work if labels were willing to accept a percentage of overall revenue rather than a minimum monthly payment or price-per-user fee.

Is it unreasonable to ask labels to accept such a risky new model with no assurances of minimum payment? Or more a question of finding more creative solutions, as with by Universal and Zune?

And what of the consumers? Does “ad-funded models” necessarily mean bumper ads before and after tracks? While the occasional ad might be acceptable, it seems unlikely that the consumer will accept a large amount of interruptive advertising within their main listening experience. Commercial radio is one thing, but that model never sought to replace core music purchases on CD. If ad-funded music has loftier ambitions, are there more inventive, less-intrusive ways to use advertising? An online equivalent of Carling venues, perhaps, with an advertiser funding a whole “P2Free” download service?

And what of Artists’ integrity? Does online offer a way to side-step the inevitable cries of “sell-out” which occur whenever a band allies itself to a secondary brand? Does it also offer a way to capitalise on, or develop existing brand-band link-ups such as synching to TV ads? Do bands deserve more than their traditional synch income for allowing a brand to hitch itself to their “cool” factor, online and off?

In an era of shrinking physical market revenues and uncertainty about digital music take-up it is perhaps inevitable to see advertising as the biggest potential cash-cow. The question is, can the music industry devise suitable ways and means to milk it, and will there be enough milk to go around?

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