According to research firm NPD, iTunes has a 67% share of the paid or legal digital music downloading category and according to our latest research, iTunes share of the category among teens and college students is closer to 77%. Regardless, as I've said many times before whether it was Urge or any other newcomer, breaking in to this category would be tough. A relatively new outfit, called SpiralFrog, has decided to skip the paid part of the downloading game all together and instead use an advertising-supported model. Pretty aggressive and pretty risky. Of course, you need a music company (ideally one of the big ones) to believe enough in the model to sign on as a distribution partner. Yesterday, the company announced its first big distribution deal with the world's largest music company, Universal. As you can probably guess, the terms of the deal weren't released, but I can't imagine any gigantic guaranteed payment to Universal, I think the music giant is looking at this as more of a test at this stage, regardless of the press hype around the announcement, which was enough to send Apple's shares down 2% yesterday, a bit of an over-reaction, in my opinion.
It will be interesting to see if this kind of model can succeed. YouTube is another player trying something similar.
Posted by: Rajesh Nidwannaya | August 30, 2006 at 12:54 PM