Last night I attended the launch party for Guvera, a new music download service that is operating with a "revolutionary" new model. (Guvera is currently operating in Australia. The wider launch of their service will be on March 1st.)
The piracy of music and other electronic content has been a huge problem for a long time. Artists, labels and publishers have lost a lot of money due to digital piracy.
Speaking at the Guvea launch party, Alice Cooper stated that new artists often wonder if they should even bother recording since they know their music will get stolen. Due to piracy, new and low-profile acts may not even make up their recording production costs - so they end up losing money by recording and releasing their music.
The artists, labels and publishers have spent a lot of time and money trying to battle piracy but a huge consumer pool has gotten used to the idea that any content delivered electronically should be free.
When music was delivered in a tangible form of a CD, LP or tape, it was much easier for the general public to appreciate the need to pay for content. With the rise in electronic content delivery, the lack of a tangible component to the content seems to have affected the attitudes of many consumers.
Instead of fighting the consumers' desire for free content, Guvera's model allows consumers to download music for free in a way that pays the artists and the labels.
They do this by teaming with a wide range of advertising partners. Instead of "Disruptive Advertising," Guvera is using what it calls "Engagement Advertising" that is targeted to each user.
When you do a music search on Guvera, you get to select which of the many sponsoring advertisers you want to pay for each piece of music. For example, you might get to choose between an athletic shoe brand, a snack brand or a car company. You visit that advertiser's channel to download the free content and, while doing so, are exposed to their brand's messaging and additional content that may appeal to you. This way you see only the branding and marketing content that you choose.
Guvera has lined up deals with an impressive array of major labels and advertisers.
If the Guvera model works, it will expand to deliver other forms of electronic entertainment content including film, TV and games. Perhaps books and comics will follow as well.
For Guvera's model to work over the long haul, the advertisers will need to feel that their payments to the artists and labels generate enough of a return. That may be easy to do on relatively low-cost music tracks.
However, if Guvera begins downloading feature films for free, the supporting advertisers will have to pay significantly higher fees to the studios than they do for a music track download. Therefore, the return they are expecting for their advertising will be much larger as well. It remains to be seen if consumers will spend enough money on the supporting advertisers' products and/or services to make free movie downloads economically viable.
Assuming the Guvera model takes off, Apple, Amazon and others who use a pay-for-content model will need to respond. I wonder if Guvera's business plan anticipates the various counter moves the competition will make and has mapped out how Guvera will respond to those moves.
It'll be interesting to watch what happens. If the Guvera model works, it'll be a win/win situation for all involved.
Thanks to Mason Gordon and Jennifer Constantine for inviting me to this event.