Free Music Encourages Sales, Says Last.fm
Today, Last.fm is announcing some stats on their free streaming radio service and its impact on music sales. Contrary to what the labels would have you believe, it appears that free music is, in fact, good for the industry, leading to increased revenue for Last.fm's partners, like Amazon and iTunes, who are benefiting from January's launch of the site's free on-demand music service.
Last.fm's on-demand service, which lets users play any particular song, only allows a user to stream a song in full three times. After which, they're prompted to purchase the track through one of the affiliate services.
Getting Prompted to Buy on Last.fm
Not only has this on-demand service been good for Last.fm - minutes spent on site are up 118% month-on-month - the service is good for partners, too, like Amazon, whose overall CD and download sales through Last.fm increased by 119%. And since the service launched, Last.fm users are purchasing 66% more albums than before.
The service, which launched January 23rd, was made possible by deals Last.fm forged with the major labels, EMI, Sony BMG, Universal, and Warner. However, independent artists and labels can also take advantage of the service to gain more exposure among music fans and make money, too, since Last.fm pays every time someone streams a song, either through a royalty collection service or, for indies, the artists can be paid directly.
Currently, the on-demand service features over 5 million tracks, which makes it easy for music fans to find the songs from their favorite artists and bands.
These numbers prove something that we've known all along - sharing music (or videos or any files, really) encourages people to buy more of the product in question, as opposed to leading to lost revenue, as once feared.
Martin Stiksel, Last.fm's Co-Founder agrees, stating, "In just over two months it's become clear that people will buy CDs and downloads if they get access to the kind of service we offer."
I would say Last.fm could even drop the play-3-times prompt and the numbers would still hold up given properly advertised affiliate links, but something tells me the labels aren't ready for that step just yet.
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"These numbers prove something that we've known all along - sharing music (or videos or any files, really) encourages people to buy more of the product in question, as opposed to leading to lost revenue, as once feared."
I think that statement is highly misleading. It gives the impression that all sorts of sharing increases revenue. But Last.fm isn't sharing a digital music file, its letting you listen to the stream. Sure, you can hear the song, but they aren't giving away a free track. You still have to buy the actual track. Its not really sharing, its more just like listening to a single song on the radio. In fact, seems kind of obvious to me that this would work ahead of time. People don't just listen to songs once and then they're done, they want to listen to them many times. Companies used to pay to get their songs on the radio because they knew people would go out and buy the albums. This is the same strategy.
So while we've known all along that this works for music, I don't see how it proves it for video or files. Do movie clips on You Tube sell more movies? How does this work for files? Giving away the preview is totally different than giving away the final product. It remains untested whether giving away a file or a movie clip will increase sales.
I agree with you Sarah. The 3x play limit doesn't make sense because websites all over the Internet already offer unlimited free streaming of songs and sometimes even downloads. These gradual steps into changing the infrastructure are going to leave the record labels in the dust. If they still have a chance, execs need to heed the power of social media and it's participants (the people), and jump ahead of the curve, or at least keep up with it.
When the music industry claims that "free music" is damaging music sales, they're almost always referring to the illegal download of high-quality audio files. They're not referring to streaming, online broadcasters such as Last.fm. There's nothing in Last.fm's announcement that contradicts the position of the music industry on this issue.
This sure is exciting and encouraging to the industry.
Last weekend while walking in a mall, I saw a DVD-record shop that was playing in their big plasma screens a live concert from Celine Dion. When I saw it I wondered who can be interested in having this DVD? I am not specially keen on Dion, so you can imagine that the idea of purchasing it was never in my mind.
A couple of days later I saw a TV add of Dion's DVD, and thought, why not downloading it from emule. Celine Dion World Tour will be soon in town, so why not see what the show is about.
Clearly I would have never bought the DVD in the record store.
Yet, the curiosity might have made me spend 1hr of my time to watch the downloaded concert.
What would Celine Dion prefer? Shouldn't she prefer that I watch her downloaded show for free, and maybe get my interest to go to her concert?
Interesting, middle ground strategy with last.fm. Essentially, last.fm is positioned as a free trial or sample platform for purchase of music from the owners or partners of last.fm. It's not really a free radio station stream in that you the listener pick out the music you wish to hear. It's more akin to a free music jukebox. The major labels are giving away 3 free plays ... not the song in perpetuity. Sounds like a fair trade-off.
Some Canadian labels are already making a move. It's all about creative commons and the power of the social sphere. Check out The Martyr Index's new album FOR. FREE. All they ask is that you share it around...
http://themartyrindex.com/downloads/