The Rise of the Full, Ad-Supported Content Model

Pali Research analyst Richard Greenfield cut his rating on the Warner Music stock to Sell from Neutral.

His reasoning?

“No matter how many people the RIAA sues, no matter how many times music executives point to the growth of digital music, we believe an increasing majority of worldwide consumers simply view recorded music as free,” he asserted in a research report Thursday morning. “A new model for music consumption must emerge and that model most likely involves DRM-free downloadable music at no cost to consumers, fully supported by advertising.” But as Greenfield notes, “the music industry is not ready to endorse such a move at this point, and even if it was, the economic model transition will be incredibly painful.”

Industry executives frequently cite the rise of digital tracks. But these sales are still far from offsetting the decline in physical sales. Add rampant piracy into the mix, and it’s clear that some new, creative models must be employed. In 2008, it seems an aggressive approach to licensing, and advertising rev-share models with free, DRM-free music seem to be the way forward.

[via SeekingAlpha]