In a major increase in the availability of legal free music, the world’s largest record label has agreed to let users of a fast-growing website listen to its entire catalog of digitized music files.
Universal Music Group struck the deal with Imeem.com, a music-oriented social networking site, in exchange for a cut of the revenue from advertising viewed while its songs are playing.
The deal by the label for artists including U2, Amy Winehouse and Black Eyed Peas brings the last of the four major record companies to Imeem, which lets users listen while on the site but not download their own copies.
Each play of a song will net Universal a guaranteed minimum of a fraction of a cent, even if no ads are viewed, a person familiar with the arrangement said Sunday. That clause is believed to be the first of its kind for any ad-driven deal with a label.
“We’re embracing the ad-supported business model. These are our crown jewels: on-demand, full-length tracks,” said Universal Executive Vice President Rio D. Caraeff. “Imeem is the largest deal we have struck to date.”
Caraeff said Universal was also in the “advanced stages” of negotiations to license songs for free play on another popular music site, Last.fm.
Universal has long been among the most hard-line of companies trying to stop the spread of unauthorized digital music. It was the only label to sue top social site MySpace for failing to stop its users from posting copyrighted songs. Because it has no licensing deal with MySpace, Universal limits streams of music on the pages of its artists there to 90 seconds.
But piracy on file-sharing services has continued to grow, dwarfing the legitimate sales of music on Apple Inc.'s iTunes and other sites.
In part because Universal has chafed at Apple’s terms and its dominance in the market for legal downloads, the company this year said it would approve the sales of tracks on Amazon and elsewhere in the MP3 format, which can be played on an enormous variety of electronic devices. MP3s have no digital locks that prevent copying.
Taken together, Universal’s steps are among the clearest indications so far that the record industry is finally willing to experiment with new business models and formats as CD sales continue to fall.
“The music companies and publishers and labels are willing to try more experimental royalty schemes, and that’s a great, great thing,” Jupiter Research analyst David Card said. “Integrating social networking and music makes a tremendous amount of sense. It’s one of the things that made MySpace take off.”
The labels prefer subscription models such as those at Rhapsody and Napster, where customers pay month after month to keep access to songs. They hope to enlist Internet access providers or others in spreading similar deals.
But in the meantime, they are backing an increasing number of alternatives. The ad-supported licensing arrangements are the most radical, because they can support only modest payments to the labels.
“What we’re focused on is, how do we get paid when people play our music,” Caraeff said. “Even if it’s a small amount of money, it could be a large number of people.”
Since opening to the public a year and a half ago, Imeem has attracted more than 13 million registered users. Some 19 million people visit the site monthly, and more than 60 million have installed miniature versions of the site on their own pages.
Although terms of the Universal arrangement weren’t released, Imeem executives said they believed that about half of the revenue from ads should go to those who hold rights to the music.
Imeem Chief Executive Dalton Caldwell said that Universal had not imposed any of the restrictions that have hobbled other free-music deals, such as limiting the number of times a song can be played.
After promising Universal it would deliver a certain amount of revenue, Caldwell said Imeem now must “make a bunch of money. We have to see if ad-supported music really works.”