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When "Free" Downloads Are Also Legal: Are Ad-Supported Music Subscription Services Like SpiralFrog The Answer To An Ailing Industry?


Friday, Sep. 08, 2006

Free music is now becoming more and more acceptable and mainstream - and believe it or not, it is legal.

If this trend continues, it could very well be a long overdue answer to the plight of an arguably devastated music industry -- for the advent of free, legal music seems to be good for all players, provided the game is played properly. (Full disclosure: I am part of that industry. I serve as Senior Counsel, Music, for RealNetworks, Inc, which produces Rhapsody and the RealPlayer, among other products.)

To see why, it's instructive to look at the yet-to-be-launched service SpiralFrog. Despite the hype, SpiralFrog isn't anything all that revolutionary. It is, however, a step in the right direction. And it illustrates why -- on the spectrum where free and illegal reside on one end, and for sale and legal on the other -- the lines are beginning to blur.

The Facts About SpiralFrog: The Downloads

How can free downloads be legal? The answer - when it comes to SpiralFrog, at least - is, first, that they are not precisely downloads, and, second, that they are not precisely free.

First, SpiralFrog will not sell downloads in the sense of providing digital music for the relatively unlimited and perpetual use that most of us think of as "ownership." Rather, SpiralFrog users will subscribe to a service that will offer them "limited" or "tethered" PlaysforSure downloads in the Windows Media Audio format. At the end of six months, the downloads "expire" and become no longer playable. Also, and significantly, these downloads are not compatible with iPods.

In sum, SpiralFrog will be a digital music subscription service, much like Napster, RealNetworks' Rhapsody, MTV's Urge and others. In this sense, it is nothing new: such digital music subscription services have been offering very similar "To Go" subscription services since early 2005.

How SpiralFrog Users Will "Pay": By Watching Ads

Second, although users of SpiralFrog will not have to pay money to use the service, they will have to view ads. More specifically, the SpiralFrog "downloads" will only last for six months provided that the user watches a complete SpiralFrog-provided ad at least once a month during that period. A user who fails to watch the ads on time will lose access.

Like the subscription-service model, the ad-based-revenue model, in itself, is nothing new: Digital music services have been supplementing their revenue pools with ad dollars for years. A quick visit to AOL Music, Yahoo! Music or any of the other web giants with music offerings confirms the significant role advertisers play in the digital music service industry.

Still, the use of ads alone, in combination with a subscription service, could help SpiralFrog compete with current services (including those that also use ads). Although iTunes offers true downloads -- which last indefinitely, not just for six months - it also charges for them. SpiralFrog will not.

It's hyperbole, however, to spin SpiralFrog as something completely new in the market - or, as some have called it, an "iTunes killer."

Is "Free and Legal" the Answer for the Recording Industry?

Since the court-mandated crash and burn of the original Napster in 2001, the RIAA, the trade group that represents the US recording industry, has been relentlessly fighting the War On Piracy with little success. Tens of thousands of lawsuits have been filed against individual file sharers. Millions of dollars have been spent on an aggressive global anti-piracy campaign. The slogans have tried to appeal to downloaders' consciences: Feed a musician. Don't steal music. Millions of wrongs don't make it right. We have all seen them.

But piracy is actually increasing, despite these efforts. It has been a grueling uphill battle for the entire music industry to attempt to reverse a strong trend, and to send the message that music is not actually free - and that downloading it without paying, is not borrowing, but stealing.

With services such as SpiralFrog beginning to crowd the digital music space, however, users can get music for "free" and the labels can still get paid.

So, how is it that the industry has come around and agreed to let a digital music service use the four letter word "free" in association with their content? Maybe free and legal is the answer. SpiralFrog may not be an iTunes killer or anything all that revolutionary, but it is a step in the right direction. Provided that we all maintain the web traffic levels currently flowing to the many online music sites, there is a lot of ad revenue out there for the taking.

If music services can collect adequate ad revenue to pay the labels for music consumption, without ever having to collect a fee from end users, many of whom have grown accustomed to getting their music for free (illegally) anyway, we all win: The artists are paid by their labels. The labels are paid by the services. The services are paid by the advertisers - and the users (continue to) get their music for free.

Maybe we have learned from our mistakes and figured out a way to embrace a trend, rather than fight it.

Cecily Deane Mak is Senior Counsel, Music at RealNetworks, Inc. where she supports RealNetworks' Rhapsody music subscription service. She is a frequent public speaker and writer on a range of topics including music rights, online media and entertainment law matters.

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