Free Music: A Good Idea

Why is Marek Fuchs hating on Universal today? He says that the dumbest thing he's seen on Wall Street this week, rating 95 on his Dumb-O-Meter, is Universal's plan to give away its music over Nokia cellphones. Writes Fuchs:

The music will be offered for 12 months, scientifically proven to be the precise moment amount of time after which listeners get sick of a song and never want to hear it again.
It's becoming quite the tact in modern business. Between newspapers giving away their work for free online and Universal conditioning customers to pay a grand total of -- oh, right, about zero dollars and zero cents for their music, free has become the new charge.
Said a Nokia executive: "The financial barrier to try new music is completely removed. It fundamentally changes a lot of business logic in the music industry." Fundamental change is a kind way to put it this shift in business logic. To say logic has been splattered along the track might be somewhat more to the point.

I agree with Fuchs – and Chris Anderson, for that matter – that free is the new charge. But where Fuchs sees splattered logic, Anderson and I are much more hopeful.

It's worth pointing out that Fuchs is wrong if he's trying to imply that the Nokia/Universal plan includes (a) no revenue for either company, or (b) songs which somehow self-destruct after 12 months. Neither is true.

Universal, indeed, looks set to make quite a lot of money should this deal take off: $5 per handset per month, according to Thomas Ricker at Engadget. In return for that strong, steady, and predictable cashflow, Universal is giving away songs which play on your computer, and which play on your cellphone, but which don't play on your iPod, don't even play on your Zune, and can't be burned onto a CD or converted into MP3s. (Guess what – that requires an "upgrade purchase".)

Meanwhile, Nokia plans to make a lot of money from this service too, by converting it from free to not-free once the initial 12-month period is over:

The unlimited downloads deal is good only for a year. But Nokia is betting that by then customers will be so hooked on the service they will be willing to pay more. The fee after a year hasn't been determined.

But the most wrong-headed part of Fuchs's column is where he accuses Universal of "conditioning customers" to pay nothing for music. Er, no, Marek – it's not Universal which has conditioned an entire generation of music consumers to pay nothing. In fact, it was Universal's decision, alongside the other big record labels, to criminalize the paying of nothing for music which set Big Music on its near-fatal collision course with its own consumers in the first place.

Well guess what – that really didn't work out so well. What Universal is trying here may or may not work, but at least it's a reality-based idea. Call it giving your consumers something they want and which they're willing to pay for, rather than telling them that they're criminals and creating a dynamic where they hate you and want to punish you. Not a bad idea for any company, really.