It's the oldest marketing gimmick in the world. Give away the razor, sell razor blades. Will it pay for music to do the same?
Platinum Entertainment (PTET) -- the biggest independent label in the United States despite having few top-40 acts -- is betting on the hybrid revenue model of onsite advertising plus selling CDs by giving away tracks. The company said Tuesday its entire music catalog will be available for free downloading in the MP3, Liquid Audio, and Microsoft formats beginning in December on its new Web site, HeardOn.com.
"The free giveaway of our music on the Internet will immediately result in a busy advertiser-supported Web site," Platinum CEO Steve Devick said. "At the same time, these free downloads will promote the sale of our records through retail."
By the end of January, Devick says the new site will offer 15,000 songs from artists like The Band, Taylor Dayne, George Clinton, and Pete Townshend, plus its classical, R&B, and jazz artists as well. The site will also offer music from unsigned artists, giving the most popular one a record contract worth $250,000 four times a year.
This is just the latest maneuver in the wide-open competition to provide high-quality downloadable music. For example, Emusic.com sells MP3 tracks for $1 each. Others, such as MP3.com, give away music downloads of unsigned bands to sell physical CDs, but they rely heavily on advertising to make money.
This "minor league" model has proved to be quite popular on the Web. And the Internet Underground Music Archive -- perhaps the oldest player in the space -- recently said it would split 25 percent of its advertising revenue between all the unsigned bands on its site.
Amazon.com recently said its free downloads section helps physical CD sales. The major labels are experimenting with both sales and giveaways of downloadable music, but have yet to release most of their catalogs online. They're in the process of creating a security standard to fight online music piracy.
Meanwhile, Platinum was one of the earliest labels to release some of its catalog in the MP3 format.
Competing Web sites both applauded and expressed concern over the move.
"It's a bold and forward-thinking move. I think they get it," said Andrew de Vries, vice president of marketing at MJuice.com, which offers downloadable music both in MP3 and its own proprietary format.
But "if they're going to give away a free open MP3 of every song, I'm wondering if they're not giving away a third [of their potential] revenue stream of digital songs sales."
"Opponents of MP3 and digital delivery object on the grounds that it devalues the music, and this move by Platinum is the ultimate form of devaluation," Songs.com CEO Paul Schatzkin wrote in an email. "With broadband, why would anybody pay at retail for something they can download for free? I hope [Platinum is] right about that formula, but I'm dubious."
Platinum's CEO Devick said the company will also gather user information for in-house direct-marketing and will partner with more marketing services like YesMail that will mail Platinum downloads to voluntary users.
"In this country, if a song gets played on the radio they don’t get paid anything, unless they wrote the song," Devick said. "If someone downloads a song, we will pay the artist [royalties], and we will also offer our artists stock options in the company."
He said he has confidence this new model will work, given the recent success of free services like Encyclopedia Britannica and Blue Mountain Arts. The company is also looking into launching a subscription-based listening model in the future.
If Platinum is successful with its model, look for the others to follow. As Epitonic president Aaron Newton said when asked to predict the best chance for success: "The right answer is: Be willing to change as soon as one starts to work."
