FreeAllMusic Still Believes In Ad-Supported Downloads

The distressed sale of Imeem and flameout of SpiralFrog were among several events this year that cast doubt on the viability of the free ad-supported music model, but at least one upstart company thinks it can buck the trend. FreeAllMusic, an Atlanta-based startup, entered private beta today with a model that gives consumers free MP3 downloads in exchange for watching visual ads from sponsors who pay for them — and it’s already convinced two major labels to come on board.

I spoke with CEO Richard Nailling this afternoon, and while he acknowledged that the free ad-supported music arena “is a bloody space,” he believes FreeAllMusic is easier for consumers — and provides more guarantees for advertisers — than SpiralFrog, its closest antecedent. For now, the company is allowing consumers to choose a visual ad from among up to a dozen advertisers, but brands may be able to associate themselves with artists and songs eventually. Once an ad is chosen, FreeAllMusic broadcasts more banner ads elsewhere around the web that include the downloader’s screen name and the sponsoring brand; Coca-Cola (s KO), Warner Bros. Television and are among the early advertisers.

I’m naturally skeptical of a new company so similar to one that perished so recently, but Europe’s We7 has persisted with another related model with some success, and FreeAllMusic doesn’t have any of the DRM-related entanglements that dogged SpiralFrog. Still, people are generally loath to jump through hoops to acquire music, especially when it’s still so easy to acquire it for free without sitting through ads. And I don’t think anyone will be too enthusiastic about his screen name appearing in banner ads all over the web.

The company hasn’t disclosed which two major labels it’s signed up, although Nailling said each is providing its full digital catalog, as is one independent label. He added that FreeAllMusic completed a seed round this fall and is currently raising a Series A round, with emphasis on strategic investors rather than VCs. And while Nailling said the company will take steps to avoid growing too fast at first, such as capping downloads at five per week, its private beta is set to open up sometime early in 2010.