21st Century Business - Freemium Model

This blog will highlight some of the ideas and techniques that have worked for some bands in the music industry in the very recent past. My purpose is not to deride or encourage any one particular idea, but merely highlight what has worked for some and what may work for you. First - the freemium business model.

Generally, a business model is a framework or structure that a company establishes to place a value on its goods and services and then exchange those same goods and services for the established value from consumers. In short - a business model is a plan to sell your stuff to people that want to buy it.

The traditional business model in the music industry is selling recorded music on a medium that consumers can then listen to at home, and then supplement this product with related merchandise, live performances, and access to the artists. In the last 10 years the medium has shifted from physical goods like cassette tapes and CDs to a digital medium - MP3s and Apple's iTunes. While this shift has made music more accessible and portable, it is also more susceptible to theft and piracy. As a result, CD sales are steadily declining, record labels are going out of business or laying peole off (See WMG), and the overflowing well of money that fueled VH1's Behind the Music extravaganzas has run dry.


Under the freemium business model, a business offers its goods or services for free to the consumer. In exchange, tthe consumer provides contact information to the business (email address, phone number, etc.). The business then attempts to form a relationship with the consumer and offer a premium service for a fee.

Fred Wilson coined the term "freemium" in March 2006, saying:

"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base."

You can see the freemium model in use everyday at Pandora and it has been used with great success by Trent Reznor and Radiohead.

The freemium model is a great way for independent artists to gain a larger following and increase their exposure on a national stage. Give an MP3 away in exchange for an email address or hand out a lo-fi version of your latest EP at a major sporting event, with the promise that a higher quality version is available for a small charge at your website or on iTunes. Essentially, the freemium business model is all about giving something away today in hopes of getting something of greater value tomorrow from a consumer that will keep coming back.