The Freemium business model is when you give away roughly 99% of your service away for free, but charge the rest of the folks for upgrades to some Premium features or services.

The free portion of the service can still be monetized, via ads for example, but it’s still free to be used by anyone.

I’ve been a fan of this model even before I heard people refer to it lately as “Freemium.” Digitally Imported Radio got off the ground as a business, in fact, as a result of this model.

Back in 2003 or so the advertising world was dismal, and it was premium subscriptions that allowed the company to start generating cash after we’ve built up a critical mass of fans over the years.

The main advantage of keeping things free, as opposed to a “subscription only” service, is that you are able to have a chance of tapping into the word of mouth effect. If it’s free it becomes easier for people to be able to share it with others. You just need to make it as exceptional as possible, so that they actually want to pass on the word.

Others Getting On Board

The New York Times online used to be a subscription service. Recently they’ve opened up the gates and most of their content is for free. The Wall Street Journal followed a similar path as well now.

Why did they do this? Were they not making enough money with subscriptions? The answer is that there was too much competition online, and even more competition entering the space every day. Online magazines, journals, blogs, you name it - all are available for free.

These other outlets were stealing all the ATTENTION, and in the long term the alternatives combined were making the NYT and WSJ online irrelevant. The longer these two kept things on a paid basis, the more they drove away the mass prospects to other portals. Then one day, the funnel would flip, and they would find themselves just a blip on the radar. It’s great to see they realized this and started to change course.

In The Future, Music Will Be Free(mium)

Very similar market forces are affecting the music industry, and again it all comes down to attention. Those artists and labels, big or small, who wish to charge fees for their music will continue to find themselves competing more and more against the new comers who will be giving their music away for free.

Remember, free = word of mouth. The free music will find more fans, faster. The fans may very well be more vocal too, which means more virility. The more and the longer others keep charging fees for music, the less relevant they will become over the years.

All the ATTENTION will flow to the free music offers, and believe me there will be no shortage of unexplored talent.  The funnel will flip again, and there will be no one left to hear the echos of the paid content in a sea of free music.

But it will not really be free- it will be Freemium. The music will be given away for free, in fact 99% of it will be. Then the Premium offers kick in for those who wish to pay from the bigger audience pool - concert tickets, merchandise, limited or special edition copies, special DVDs.

The RIAA cannot come to terms that the Freemium model will not pay as much as CD sales used to pay when distribution and ATTENTION was more expensive.

Protesting or working against it is pointless. It’s not that I WANT to make it free and am calling for it, it’s just that THE MARKET will do that all by itself because of the new dynamics. Those who fight against it will be marginalized by the sea of freemiums out there. Those who embrace it will cater directly to their audience and work to get and keep its attention.