Jumps On The On-Demand Streaming Bandwagon

I’ve been saying for as long as anyone would listen to me that one day all the music ever recorded is going to be on the Internet and we are going to have sufficient bandwidth and connections on every possible listening device and at that point file based music is going to be history. I’d go back and find all the posts I’ve written on this topic but it would fill up the whole front page of this blog. I believe this with all my mind, heart, and soul.

We’ll have a bunch of ways we can listen to this music.

We can listen in "radio" mode where we tune into some kind of DJ and we let them play music for us. This largely exists already. You can listen to Radio Paradise which is exactly what it sounds like, you can listen to neighbor radio (here’s mine), and you can listen to hype machine’s popular list. The services I’ve listed here and many others pay the compulsory streaming radio license to soundexchange or directly to the various rights holders.

Or we can listen on-demand meaning we pick the music we want to play, either song by song, album by album, or via building playlists. These services pay a royalty to the rights holders of $0.01 per song and to date have funded those payments by charging a monthly subscription of between $5/month and $15/month. The leading on-demand streaming service has been Rhapsody which I’ve advocated for years, particularly when combined with an in-home device like Sonos. There are others in this market like Yahoo! Unlimited (which is rumored to be leaving the subscription music business) and Napster (the new Napster). I have heard that none of these services is profitable, but I could be wrong about that. announced today that they are offering their own on demand service. They are pushing the envelope with this service in two important ways. First, they are allowing anyone to listen to three free plays of any song before they have to become a subscriber. Second, the monthly subscription is $3, much lower than anyone else (at least to my knowledge).

Will I switch from Rhapsopdy? Not yet. I’ll probably add a subscription to’s service for two reasons. First, I believe in paying for music. This money will go to the artists (at least for unsigned artists who put their music on Second I might want to listen to a song more than three times on and I’ll need a subscription to do that.

But right now Rhapsody works on Sonos and doesn’t. Since we do most of our Rhapsody listening on Sonos, that’s a good reason to stay on Rhapsody even though it’s 3-4x as much as

It appears that is planning on paying for the on-demand royalties through a combination of advertising and subscriptions (that’s why the subscription is lower). That’s certainly a step in the right direction.

In my vision of a pure streaming world (which I outlined in the opening paragraph of this post), we’d have a third option. Which is fully ad supported on-demand listening. It’s too bad that can’t go all the way to free (they are getting close). Because until on-demand listening can be supported entirely by ads, I don’t think it will be a mainstream service. It’s still possible to get music for free and many people choose to do that instead of paying for a streaming subscription service.

I do think that paid and ad-supported/free can co-exist in the market. It works in radio where some are willing to pay for XM and Sirius while most are happy to get some ads and not have to pay for their radio.

I hope will consider offering a totally free on-demand service supported by in stream advertising (supplied by targetspot of course!). I think that’s something that the market would really respond to.

I’ve been beta testing a service called Spotify that I can’t talk much about other than to say it’s another on-demand streaming service and it’s very good. I hope they’ll have the courage to try the free/ad-supported model in addition to the subscription model.

Back to’s announcement today, there’s one thing I really wish they’d have done. I’d like them to offer embedding an on-demand player on blogs and social net profiles. If you click on this link to, you can listen to Vampire Weekend’s song, Cape Code Kwassa Kwassa, which I like very much. But I don’t really want to force you off this page to hear the song. Instead I could upload the mp3, like this – Cape Cod Kwassa Kwassa – Vampire Weekend. If they offered an embeddable player, that allowed anyone to listen to a song, monetized by audio ads after the song and before the next song, I would stop uploading mp3s and start embedding the player.

If they don’t do it, someone will. Because it’s the logical next step in the streaming audio game.

#My Music#VC & Technology

Comments (Archived):

  1. Joe Lazarus

    Great post Fred. I agree file based music will eventually die. It’s been exciting watching the market move closer to that vision over the last few months (whether the labels like it or not). Just a matter of time. I posted a similar comment about the embed player on my blog earlier today……That seems like a no-brainer. It would reduce illegal posting of MP3’s and generate incremental revenue for, bloggers, and the labels. They should turn the player into a massive affiliate program. I have to imagine that someone at thought of that. I bet the labels are resistant. Again, it’s just a matter of time. Viva la music revolution!

    1. fredwilson

      Totally agree with your postDiscovering music via embedded music on blogs is such a great experiencefred

  2. nickdavis

    It seems that Pandora might also be in a position to pick up that mantle. They are essentially ad-supported custom-radio now. If they see a path to profitability in exposing on-demand to their interface, it would be great to see them succeed.

  3. Russ Garrett

    Hi Fred, unfortunately’s on-demand subscription is going to be quite a bit more than $3 per month (which is the price of our existing feature subscription) – this is the reality of our agreement with the labels. We haven’t launched the on-demand subscription yet. Also, we are talking with Sonos, I’m not sure where we stand with that though.

  4. jimcarini

    Hi Fred, a “pure streaming world” is unrealistic. While I agree that all music will be available and streamed on the Internet some day there will always be people who would rather own it, carry it around with them and not have to be wired up to a computer to listen. I believe there is and will continue to be a market for fairly priced, high quality, non ad infused, non DRM downloads that people can own and do with what they please. P.S. Spotify is hot isn’t it?!

    1. mikereilly

      If streaming became the mainstream, so to speak, you could probably get good money from the technofiles who had to “own” the higherst quality, most perfect copy of a given file . Everyone else just wants to hear what they want to hear when they want to hear it or be turned on to new music based on their likes and dislikes.Whoever can manage the traffic and delivery of music as well as video/movies/tv etc, and can partner with a new breed of players, hardware built for wireless media delivery in a variety of styles and sizes for at home or on the road; will win big.

  5. twillerer

    I can’t say I disagree with you, but I wonder how far out this is. Until I (and many others, I’m sure) can reliably stream media from a device other than a computer reliably, this may be a bit out. I can’t tell you how frustrated I am that I don’t have a potable device that allows me to stream music, and I’m equally frustrated that I can’t stream in my car. I agree this is the future, but probably not mainstream for another 5 years.

    1. fredwilson

      i totally agree with your timeline. it could be even father out because it takes almost five years to get built into a car these days!

    2. Ethan Bauley

      YES!I was going to raise this point (re: cars)Maybe we’ll get it hooked in through mobile phones sooner?

  6. brooksjordan

    Looks like Yahoo is exploring an ad-supported service: you posted about their embeddable player the other day . . .

  7. andrewpascoe

    Fred – I wouldn’t be surprised if the guys were working on an embeddable player (evidenced by them having so many different options for embeddable charts, quilts, etc etc – of course the economics are just a wee bit different). It’s probably just a priorities / launch thing – for example the free streaming of full tracks on-demand is current only available on the site and not for example in the separate application yet.Joelaz – I like your idea of turning the player into one big affiliate program – I hadn’t thought of it that way in the past.

  8. William Ryall

    Streaming music is costing about $0.01 per play, PPP (pay per play) is promising it’s network CPM of $10+. If they deliver on their promise then the five second ad’s they run will be enough to cover royalty fees and then company XYZ can make it’s profit from other advertising/affiliate sales of the albums/songs.Then just let people embed songs where ever they want and we have a working model. I dunno how annoying listening to those ads would get though..

  9. markslater

    i am as passionate as you about the brave new world of music. Its a highly significant part of my life. What you talk about is music going back to its original context – a service not a product. (see berkley school of music proffesors book from 2 years ago)my acid test for the longest time has been ww.di.fmit would not appear to be a category of musical style that you enjoy, but they continue to beat the market at every turn. so much so that before i buy any wireless device (my curve, my wife’s iphone) i make sure to test the sites quality. i (personally) am yet to see the music model that ‘wows’ me -lots of exciting stuff – too many point solutions however, music needs to be air ( i plagarise the book) we should be able to consume and enjoy as per the analogy

  10. A3Munier

    About Vampire Weekend; you can as always listen to new music on…(there’s a feed as well;)

  11. markslater

    sorry for the repeat post – the book i referred to is ‘the future of music’ find it (and the author) here http://www.futureofmusicboo

  12. markslater

    and while i am at it listening to the arctics on my way to jakharta, there is absolutely no way that a french banker could expose over 4 bill without triggers. more to this one for sure…. “dont be surprised when you get bent over, we told ya, but you were gaggin for it…” bringing it back to the music topic and all…;)

  13. chrisherbert

    Happy to see the link to Vampire Weekend, a friend just told me about last them last week and as always, you’re already on top of good new music. Check out their song “Walcott”, my favorite of theirs so far:

    1. fredwilson

      I love Walcott and I love the whole record

  14. Bruce Barber

    Fred,I’m excited about what’s happening in the digital music arena thanks to the technologies you have mentioned; streaming, downloads, embedded Web players, etc.But I believe the “fulcrum” could be the good old fashioned DJ.As someone who (like you) loves great music, and who (like you) believes in paying the artists, I’m left feeling overwhelmed by the number of choices. I simply don’t have the time, or the inclination, to go to the various music discovery sites. So maybe once a month or so I’ll go to the iTunes Music Store and see what I can find.On the other hand, your music posts have turned me on to more new music than any other source in the past year or so. And I ask myself why.I think that it’s because a “DJ” (should “DJ” now refer to “Digital Jockey”?) adds context, something you don’t get from some of the technological solutions like “…if you liked this song, the algorithm thinks you’ll like this song…”The great radio DJ’s of the past picked their own music, and told you why they picked that music. The audience responded to that passion; you formed a RELATIONSHIP with the DJ.In my case, when you posts a song from, say, Kings of Leon, the relationship I have with you through your blog has made me receptive to something great that I probably never would have found based on my preferences in iTunes.So, as opposed to having a service that gives you unlimited choices, wouldn’t it be better to have a site where you could find a controlled number passionate DJ’s in each musical genre with whom you would form a bond.Then, having discovered a great new (or old) song, from a great new (or old) artist, you could easily download it in the format of your choosing.

    1. fredwilson

      Thanks for your kind words BruceI am happy to be called a DJThere aren’t many forms of praise higher than thatfred

      1. Ethan Bauley

        Dj’ing is indeed incredibly fun…Have you ever gone to the next level and played with mixing/blending songs?(Traktor, Serato, etc)I would like to see an iTunes/iPod that includes automated beat-matching software. Revolutionize the playlist!!!

  15. Ashley

    I believe a company called is in Beta for their fully ad supported music play. They are showcasing at MIDEM.Net in Cannes and I believe have closed a $25m+ round.…They come out of the ashes of SpiralFrog.EnjoyAshley

  16. andrewpascoe

    Fred, have created a Facebook app that utilises the on-demand capability . The style is ‘play favourite tracks (in full) of your friend X’ –…I can’t see if there’s functionality to embed this app into your profile itself thought at this stage, which I’d say is a key part of the distribution equation – I don’t want to have to keep visiting that specific URL.

  17. msthilaire

    For your dream of file-free music to truly come of age a few things need to happen, some of which you have already mentioned in one way or another, many of which have significant barriers that hopefully will be solved.1. Ubiquitous internet. Right now I have internet in my house, and at work. Other than that, maybe a cafe or two has it, some of whom charge for the service. It needs to be EVERYWHERE. Gym, work, car, home, walking down the street, travelling abroad, at my aunt’s house in Sheboygan, etc. Same device, universally connectible everywhere to the internet.2. Universal subscription plan. I pay one price per month for all the access I need for everywhere I go. None of this “well if i’m in my car I have this plan, then if I’m in cafe x i use this, cafe y uses a different payment system, at work it’s something completely different” etc.3. It needs to be high quality. Qualty of streaming music is all about bandwidth and reliability( i’m sure someone smarter than me knows exactly how many mbps you need ). The commonly available wireless devices out there currently don’t cut the mustard if you have a bunch of people trying to stream stuff on the same WAP.4. All of this technology needs to be available at a reasonable price. Especially on the access point side, if local access points need to be installed to create this network.5. It has to be at least as easy as MP3s. Shouldn’t be to hard on the user interface side, but the players have to be very easy to configure to access the internet. You don’t want to be trying to type in firewall rules into a small portable device for example.Right now, the path of least resistance for all of this would probably be via the cell tower system, or possibly a satellite based system. Unfortunately both of these have issues when you go inside buildings, so it needs to be seamless hand off to a localized WAP, but then that might require localized configuration for every WAP you access, plus equipment cost barriers for the WAP provders, not to mention security issues, etc.My timeline guess would be closer to 10 years than 5.I remember back in about 1994 saying ‘one day we’ll enjoy movies on demand over the internet, no more renting from video stores’. Yes, you can sort of do that now, but the quality and selection just aren’t quite there yet. So 14 years later we’re getting close, but still a few years out.

  18. Jamie Perlman

    Fred, I couldn’t agree with you more. Reading this post, I heard echoes of so many variations of conversations I’ve had with people over the years. Clearly ubiquitous internet connectivity is coming – sooner or later (hopefully sooner) my phone, my car, my laptop, etc. will all, always be connected to the information cloud in the sky. And when that happens, purchasing, storing, and managing (music) files will just not make any sense. At that point piracy becomes a non-issue. Seth Godin’s blog from the other day is spot on in the same vein – make the content so inexpensive and convenient that considering any alternative is simply ludicrous. Tethered downloads (even if they utilize “evil” DRM) were a good transition solution until wireless ubiquity becomes a reality. It’s such a shame the industry couldn’t get it together sooner. Instead of fighting for subscription support on iPods, they bickered over the pricing of a la carte downloads. Now they’re selling MP3s….

  19. davidporter

    Fred,A couple quick points: I’d disagree on what makes this offering unique, as Napster’s had a similar 5-free-streams limit for a couple of years now, and I think the $3 price point is actually for the existing premium radio service not the new on-demand one.I do think that has a better shot than anyone to date in making this model work b/c (1) they’ve a huge existing base of users that trust their platform and are ripe candidates for upsell, (2) the UE, while far from perfect, is very good and incorporates a lot of smart social features that others tried to “bolt on” after the fact, once social media/features grew popular a few years ago.I agree with your last point completely and I’ve no doubt they’ll add this (as long as not otherwise somehow prohibited by the Majors).

  20. jon labes

    Fred, if you like Radio Paradise you should get them to incorporate Adaptive Blue into their playlist. I can’t think of a more perfect demonstration for that technology.

  21. djtonyz

    Fred, Ethan:There is a new DJ Player a little bigger than an iPod. You press a button to switch between tracks 1 and 2. There is a touch-sensitive crossfader. It’s being released in Europe then the U.S. by Tonium. Go to to learn more.Tony Z.