(This is a story I wrote for globetechnology.com about Spiral Frog, based on an interview I did with founder and CEO Joe Mohen. I’m cross-posting it here for anyone who might have missed it. You can listen to the audio of our interview here. And my colleague Ivor Tossell has a look at the service here)
Delivering entertainment for free — paid for by occasional ads for cars and toothpaste — has worked pretty well for TV and radio all these years. So why not use the same model for music that gets delivered over the Internet? That’s the idea behind SpiralFrog, a new service that launched in Canada and the United States earlier this month. It’s one of a number of services that are trying to make a business out of giving away ad-supported music.
With Spiral Frog, users must watch a video advertisement or take a survey while a song is downloading. Two-thirds of the income from those ads is then passed on to record companies and others who hold the licensing rights to the music. Spiral Frog founder Joe Mohen, a former U.S. software industry executive, says that while the idea seems simple enough, the reality of putting together such a service has been “the most complex project I’ve ever undertaken.”
The company has been around for almost five years, but only opened to the public a couple of weeks ago, in part because the technical issues involved were so complex. The service was originally scheduled to launch last year. SpiralFrog has also undergone a certain amount of executive turmoil. Several senior executives left the company abruptly in January, including CEO Robin Kent, the former chairman and CEO of ad agency Universal McCann.
Mohen says that one employee resigned and two were terminated (although several news reports have said that six executives left in all, including the former chief marketing officer and the former chief operations officer).
The Spiral Frog founder wouldn’t say why the employees left, except to say that they were only at the company for a matter of months, and that as companies grow they “need people that can perform… at a different level.” Several board members also left and have been replaced.
Robin Kent is now involved with another music startup that plans to give music away supported by ads. Qtrax, which has yet to launch, is based on “peer-to-peer” technology similar to that used by Limewire and other music-sharing services. Qtrax says it has already signed licensing deals with EMI, Universal Music, Sony BMG and Warner Music.
Another ad-supported service called We7, which is based in Britain and was co-founded by singer Peter Gabriel, also launched recently but doesn’t have any deals with major music labels.
Mohen says the most difficult part of getting SpiralFrog running has been tracking down the different parties who might own the rights to a piece of music. That’s part of the reason why the company did its early trials in Canada, he says.
Canada has several agencies, including the Canadian Music Reproductions Rights Agency (CMRRA), that can “get you the rights to 85 per cent of the songs with a single contract,” says Mohen, and therefore it is “a much easier place to get started.”
In the United States, there are 38,000 separate music publishers and rights-holders, the SpiralFrog CEO says — and no single agency keeps track of who owns what. Not surprisingly, Mohen says that convincing the four major record labels to try and use the SpiralFrog service has also been extremely time-consuming.
“It’s like going to General Motors and convincing them to give away the cars for free, in return for half the gas money,” he says. “This was not an easy undertaking.”
While the industry is desperate to find alternative sources of income as CD sales continue to fall — EMI recently started selling its songs without any digital rights management (DRM) controls, the first label to do so — not everyone is convinced that giving away music will work.
At the moment, Universal is the only major label to offer its music catalogue through the service. The SpiralFrog CEO says negotiations are ongoing with the other major labels, however, and that the service now has over 800,000 tracks (Apple’s iTunes has more than 3 million tracks).
The other major labels aren’t the only ones to be skeptical about Spiral Frog’s chances. A number of prominent tech blogs have pointed out that the service includes features that make it less than appealing, including the fact that music is only available in Windows Media format.
That means the songs are incompatible with the iPod, the world’s most popular music player. SpiralFrog’s terms of use also don’t allow buyers to burn the music to CD. In addition, the service requires that song buyers log in once a month, or their music will no longer be playable.
We7, by contrast, attaches a targeted audio or video advertisement to each song but then allows users to do whatever they wish with the track once they have downloaded it.
Mohen says that Spiral Frog currently has several large advertisers signed up for the service, including Chevrolet, Colgate, Sony and Burger King.