Media Decoder Blog: For Many Digital Music Services, Free Is Not a Choice

The competition among streaming music services is going global. It is also increasingly going free.

Digital Notes

Daily updates on the business of digital music.

As CD and download sales cool, the music industry is looking to subscription services like Spotify, Rhapsody and Deezer to provide an attractive alternative to pirated content. But the growth of these companies has been relatively slow, and to compete against one another, more of them are opening free tiers — a move that gets attention, but has always caused worries that it could undermine the value of music.

Rdio, a subscription service created by the founders of Skype, is the latest to offer music gratis. On Monday, the service, whose regular prices are $5 and $10 a month, said that it would offer a free level in most of the countries in which it operates, after doing so in the United States in late 2011. The plan includes a limited amount of free music for six months — the company is secretive about exactly how much free music you get — and, unlike most other services that have a free tier, it has no advertising.

“I don’t want to devalue the content,” said Drew Larner, the chief executive of Rdio. “But we certainly have come around to the fact that in order to get the largest amount of people into the top of the funnel, the state of play is now that a free offering is critical.”

For almost every service, the goal of free is to get listeners hooked so that they will eventually pay for access. Pandora is one notable exception: although it has a premium plan, the company’s effort to compete with radio has made free access — and ads — a central part of its plan.

Mr. Larner said that in the United States, the introduction of new music over a year ago, and a multimillion-dollar advertising campaign — with radio spots and banners in Times Square — had helped raise Rdio’s profile and draw new users, although he declined to offer specific numbers. Rdio has never disclosed its user numbers, but they are believed to be far lower than those of Spotify, with five million paying users around the world, or Rhapsody, with one million.

Rdio is available in 17 countries, including Britain, Australia and France. The free version will be available in all countries except Germany and Brazil, because of licensing issues in those countries, Mr. Larner said. For Rdio, the decision not to include advertising means not only that it will forgo ads a source or revenue, but also that the company will be paying royalties for the free music out of its own pocket.

The move to free has largely been sparked by Spotify, but it has proved hard for others to resist. Shortly before Rdio added its free tier in the United States, Mog, another small competitor, came up with its own version. (It was no coincidence that Facebook was introducing its social graph around that time, which integrated entertainment apps.)

Deezer, a French service that has announced plans to open in more than 100 countries, recently announced that it was adding an ad-supported free tier. Rhapsody, online since 2011, has no free level.

Mog, which was bought last year by Beats Electronics, the headphone company, and is expected to return later this year in revamped form under the name Daisy, has not announced its future pricing plans.

Article source: http://mediadecoder.blogs.nytimes.com/2013/01/28/for-many-digital-music-services-free-is-not-a-choice/?partner=rss&emc=rss