If the price of downloadable music is
marching inexorably toward zero, SpiralFrog Inc. expects to lead the brigade. The company, which launched an ad-supported service offering free downloadable songs in September 2007, expects to entertain 6 million unique visitors this month. SpiralFrog primarily serves younger listeners with more time than money on their hands, says founder and chairman Joe Mohen.
Mohen concedes that the service isn't perfect yet. "Just over 50% of our user searches are satisfied," he says, noting that SpiralFrog includes songs from Universal Music Group and EMI Group but is still negotiating with the other two major labels, Warner Music Group Corp. [
WMG] and Sony BMG Music Entertainment. The company continues to add independent labels, including two more this week, and has arrangements in place with digital distributors such as IODA as well as music publishing houses.
The company's model is unique. Users can download legal song files for free provided they take the time to watch advertisements and continue to visit the site at least once every two months. The files are protected by
DRM software and playback is limited to two devices, notably excluding
Apple Inc.'s iPod and iPhone products. SpiralFrog keeps about a third of the advertising revenue and shares the rest with content owners and publishers, Mohen says. He notes that CPMs run as high as $30 for top-brand display ads.
Initially funded by its founders, SpiralFrog has raised more than $30 million in private capital, primarily from hedge funds including Moore Capital Management and Stagg Capital. Mohen says venture capital firms shied away from SpiralFrog due to doubts that major labels would ever participate. He says that although the company is exploring a future round that could include strategic investors, it has never given equity to record labels.
Mohen says SpiralFrog has no plans to sell DRM-free music on the site, although it does provide referrals to MP3 stores. The company hasn't experimented with DRM-free models, although Mohen says he expects that in general, older consumers will pay primarily for DRM-free MP3s, while younger consumers with little cash and plenty of free time will happily watch ads in exchange for free music. "They'll save their money for beer and not content," he says.
-- Paul Bonanos
See June 3 announcement of SpiralFrog's agreement with EMI Music
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