Targeted advertising to save ailing record industry from the chaos of illegal downloading?

The equation is pretty simple: as the quality of modern broadband provision increases, so too does the range of content that can be accessed illegally. A decade ago an evening’s Napster haul could rarely extend to beyond a few single mp3s, mostly chosen from a fairly narrow selection of what was currently popular. Now a few hours’ downloading can easily yield a hundred chart albums, maybe even a few Hollywood films, computer games or other software. It’s no wonder that the people responsible for publishing this content are keen to reclaim a market they used to rule, and in which now they are increasingly seen as out-dated ogres, selfishly refusing to share, like a child hoarding toys. Their latest lifeline involves using targeted advertising as a replacement revenue stream, which will finally reverse the slump in industry profits, restore confidence in an uneasy market and strike a balance which keeps users, artists and publishers happy. So goes the plan anyway…

The plan is to embed advertising within content, or around it, so that users who currently access it with no authorization or benefit to the publisher will at least be exposed to targeted advertising in doing so. The idea is hardly new; we are used to commercial TV operating on this principle, and to film studios generating cash by placing adverts before feature films (and within them via product placement). There is now also a mobile phone equivalent in the form of network provider Blyk, which offers users free minutes and texts in return for receiving two or three targeted ads to their handsets per day. In January a US service called QTrax promised to have finally translated the principle to online music sharing.

Their premise was to offer users a chance to download a QTrax Media Player, which would slot onto existing p2p file-sharing systems and offer free access to unlimited music from participating record labels (currently including EMI and Sony) in return for being delivered a range of targeted advertising while downloading. The software would monitor downloading habits, and thereby ensure only relevant ads are shown.

There is however one unfortunate problem with these advertising based solutions, and it lies in users’ perceptions of art. Music enthusiasts value what they download and listen to hugely (if not with financial backing), and it is often a serious passion or hobby in their lives. In other words it is ‘art’ and not ‘content’ to them, and unfortunately for publishers this art is a lot less accomodating to marketing techniques and practices than the modern concept of ad-friendly ‘content’. Art’s freedom from corporate interference or ulterior marketing only heightens its purity of unompromised creative vision, and hence its intrinsic artistic value. Very few mediums or genres have been able to integrate corporate mechanisms without turning off a huge proportion of their audiences (modern Hip-Hop and Rap is perhaps the only musical example of a genre whose audiences will tolerate brand messaging and corporate influence). It is this active resistance to the workings of marketing and big business that presents a considerable hurdle to publishers, even once the free element has been conceded. Casual users may be easier to persuade, but they are not the ones who spend hours upon hours surfing, downloading, hacking, programming etc. It is this section of users who firmly believe in the egalitarian, utopian freedom of the web – and especially so when it comes to filesharing.

Ultimately it is difficult for publishers in this climate where users have become rather accustomed to the concept of free music. Any move back towards a time of more limited access is unlikely to be popular, or even practical. Alternate more modern solutions such as making up lost revenue from delivering targeted adverts would in theory work well. The software is simple to incorporate into existing user habits and infrastructures of sharing; record companies are keen to sign up, as no doubt advertisers would be too (check for example the massive success of Phorm in convincing advertisers that targeted ads represent better value for money). The snag is that the real challenge in this persistent battle is not thinking up or implementing a new solution – but persuading users to compromise their current preference for entirely free, conveniently available and ad-free music access. It’s a collossal task, and I for one do not envy their position in it.

Dejan Levi

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One Response to “Targeted advertising to save ailing record industry from the chaos of illegal downloading?”

  1. At 19th March, 2008, 5:33 pm Steve Purdham says:

    Hi Dejan,
    Great to see someone discussing new solutions to ad-supported music delivery. I’m CEO of We7, a UK-based ad supported music download service who embed short-term audio ads onto tracks, and I agree with much of your analysis. There are challenges to all the new models and you’re right that some music fans have a way to go before they can accept the business-like reality of music. Relevant targeted ads have a big part to play, which we do well, but are constantly aiming to improve on. However, I’m proud to say we’re gaining real ground and acceptance – having smashed the 2m downloads and 100k subscriber levels in just 9 months as well as sealing a deal with Sony BMG.
    I look forward to seeing how far the industry moves in 2008 – as I’m sure you are!
    Steve Purdham – CEO
    http://www.we7.com

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