Just when iTunes had taught (some of) the world to pay for music with restricted playback rights, Facebook had to go and ruin it.
Tomorrow, at its f8 developer conference, the social network is expected to reveal details about Facebook Music. In anticipation, music streaming services like MOG and Rdio have announced or launched free versions of their previously subscription-based services. Then came the waterfall: Radical.fm this summer launched its free public beta service; this week the company announced Facebook integration. Today mobile content provider Myxer announced a free, ad-supported service. And then Kazaa (remember Kazaa?) launched an iPhone app to compete with its peers’ mobile offerings.
For its part, MOG has a free music “gas tank.” Rdio hasn’t really explained much about its free version, other than it being in the works. And Spotify, the natural category leader, is free in the U.S. for an explicit six months.
We call Spotify the natural leader because of its scale. Started in Sweden in 2009, the company has more than 10 million users, solid Facebook integration, and more than $250 million in venture backing. It also has offline connections to Facebook: Sean Parker, Napster founder and ex-president of Facebook, is an investor and board member of the company.
But Facebook’s big music news, according to industry murmuring, may level the playing field. Not many details have been revealed in advance of the announcement, except that the integration will include partnerships with Spotify, MOG and Rdio. According to those familiar with the platform, Facebook won’t be offering streaming technology of its own, nor will it be hosting music or making licensing deals with the music owners. The announcement is expected to create deep integration with streaming services (beyond the Facebook Connect and sharing tools already used by Spotify, MOG, and others) that allows users to engage on Facebook’s site with the music they and their friends are listening to. For example, Facebook buttons will let users identify media they’ve consumed, thereby keeping music streaming services accessible on the Facebook platform.
It may also be a way for less popular services to increase their presence on the social network and perhaps acquire more users. Will Facebook’s music integration be open to any service, or just the previously reported three? Myxer CEO Myk Willis would only say his company’s new free service, due to launch in Q4, will feature “deep Facebook integration” and that he “will be at f8 on Thursday.” Draw your own conclusions.
The only problem is whether free music, whether it is “on-demand,” which requires costlier licensing fees, or radio-style, like Pandora, is sustainable. Even Pandora, which has a more favorable licensing structure than an on-demand service like MOG or Spotify, has not been able to scare up enough ad dollars to be profitable.
Spotify and MOG, on the other hand, hope to eventually convert users to subscriptions, not unlike the business model of the industry's oldest competitor, Rhapsody. MOG’s “gas tank,” which allows users to earn more free music by engaging with brands or with the service, offers the possibility of a lifetime of free on-demand music, though its model is thus far untested. Spotify’s free service will after, a six-month trial, place limitations on free listening. Myxer’s service, which is not on-demand, will remain entirely ad-supported. “We know that the majority of people in the United States will not subscribe to a music service. That’s just a fact,” Willis said.
It’s true that only a small percentage of Americans subscribe to music streaming services (high estimates put the number at around 3 percent). Meanwhile, users of free services tend to be promiscuous. It remains to be seen which of the market’s fast-multiplying competitors will rise above the noise. If Facebook’s music integration places every player on equal footing, the volume may go to 11.