Tech Trader Daily: Apple Threat? Startup SpiralFrog To Offer Free Music Downloads From Major Labels

Apple (AAPL) may have itself a new problem. A previously obscure startup called SpiralFrog this morning announced that it has signed up Universal Music to participate in a new ad-supported music download site it plans to launch in December. The company says it is talks with the other major labels - Warner, EMI and Sony-BMG. A story in the Financual Times reports that apparel maker Perry Ellis has said it will advertise on SpiralFrog, and that Levi's, Benetton (BNG), Aeropostale (ARO) and others have expressed interest.

Ford says the site intends to give 50% of net revenue from advertising to the music publishers who participate on the site, with the pie divided based on the number of song downloads.

He says the site will be compatible with all music players other than the Apple iPod.

"SpiralFrog?" Really? Whatever.

The internets are buzzing with this one. Let's think about what we have here for a moment.

It's nice to see a major label willing to tinker with pricing; free is pretty daring, so kudos to Universal and FrogSpiral. None of the articles I've seen says anything about a guaranteed payment to the participating labels, so it's quite possible that they're in this for a piece of the upside, but they could walk away with nothing. Worth remembering, though, that the label isn't the only participant in music revenue, and I'd like to know more about how the artists are being taken care of in this deal.

I may be wrong about this, but I think that digitally licensed music royalty payments differ depending on factors like whether the music being licensed is downloaded a la carte or is streamed on a subscription basis; if the track can be burned to a CD-R/RW; if the track is transferable to other devices, and if so, how many. Stories I've seen have said the music from LizardSwirl won't be burnable, but it will be transferable to a portable device, so perhaps that hints at a cheaper deal for BlenderGecko than Apple gets for the iTMS.

The other thing the burning restriction says, of course, is that the music will be DRM-ed. I suppose it was too much to hope that the labels would go for uncrippled MP3 downloads (after all, it's not as if DRM has stopped piracy in the slightest). Eliot Van Buskirk has confirmed that IguanaMix will be serving up PlaysForSure Windows Media audio files, protected with Microsoft's Windows Media DRM 10, hence the lack of iPod support. Of course, all DRM can be circumvented, and WM DRM is no exception.

This sets up an interesting contest for 2007: will the lure of gratis music tied to Microsoft's DRM on SwirlyToad be enough to put a dent in Apple's iPod-driven dominance? In other words, is free music enough to make you want to buy gear from iRiver or Archos, or is the device more important than the cost of the music? It certainly won't be a fair fight until TwistyReptile has a complete catalog. And what to make of the statistics showing that the average device owner makes minimal use of the online music services? Does that mean that DRM-protected formats aren't really the lock-in tools we think they are? After all, the MP3s you get when you rip your CD collection or when you download from LimeWire are playable on any device. And can anyone reasonably factor in the Zune effect? If Microsoft's serious about creating a non PlaysForSure rival integrated system to Apple's iPod/iTunes/iTMS triad, that means WhirlySnake will get squeezed on both sides.

And, seriously, what is with that name?

Update: Then there's this reveal from TechCrunch:

Spiral Frog will offer a desktop downloader for Windows Media Files (no iPods!) that can be listened to on one PC and two portable devices. Here's the kicker - you must log in to the Spiral Frog service at least once per month, and see their ads, or your files will stop playing! The details aren't fully set in stone, but it will be something like that. There will be links to third party sites of the record labels choosing if you'd like to buy your freedom to at least skip the ads.

Let the en-lamening of BigContentTwistedReptile begin in earnest. First, people are already taking bets on how long it will take before Greasemonkey-driven de-DRM-ing proxy services sprout up for this thing, and now you have to visit granny once a month or your music stops playing? I can't imagine that would be difficult to spoof, either. If they can turn off your tunes for not stopping by, then this is an ad-driven subscription service; SwirlyJubJub seems to think I don't own my tracks after I've suffered through the requisite ads.

One PC and two devices? That sounds like a problem waiting to happen: what if I upgrade my hardware, do I have to de-register the devices first, or will I be expected to endure more 13-34 demo-targeted messages to re-download my music?

And WHAT IS WITH THAT NAME?