A new advertising-supporting free music website has won the backing of Universal Music Group, creating a new model that could challenge market leader Apple Computer’s iTunes Music Store.

New York-based SpiralFrog, which plans to launch its service later this year, said French-based Vivendi unit Universal, the world’s largest music label, agreed to make its library available for the service to US and Canadian customers.
The site appeared to be the first to offer legal music downloads for free to customers willing to watch online ads. The inclusion of the biggest of the Big Four music labels will give SpiralFrog an edge with consumers.
The move has the potential to shake up the online music sector, dominated by Apple Computer’s iTunes Music Store, whose marketing of 99-cent song downloads has become a model used by rivals.
“I think this is a significant development,” said Phil Leigh, a senior analyst at the research firm Inside Digital Media, who predicted the model will work.
“Youthful consumers are moving to the Internet, so the way to popularize music is on the Internet, and you have to be able to make it available for free.”
Leigh said the market has the potential to generate revenues in the same manner as radio.
“The US radio industry generates 20 billion dollars a year in revenue and they give the product away for free,” he said. “Record labels generate 12 billion dollars a year and they sell their product.”
SpiralFrog chief executive Robin Kent, a former advertising executive, said the service will offer an alternative to the pay-per-song model as well as the widely used practice of illicit file-swapping.
“Offering young consumers an easy-to-use alternative to pirated music sites will be compelling,” said Kent.
Kent said the website will offer high-quality legal downloads with protection against viruses and spyware.
It will have built-in digital rights management technology to prevent illegal copies of the downloaded songs.
A Universal spokesman who asked not to be named said the new service is among several online ventures being supported by the music giant.
“We support any model that will help offer digital music to consumers in an exciting and legitimate way,” the spokesman said.
A spokesman for EMI said the British-based music giant is “open to any kind of model that is consumer friendly and creates another way to download digital music.”
An industry source said EMI was in negotiations with SpiralFrog and other groups that may be launching ad-supported music websites.
Although surveys show many consumers still use file-sharing sites to swap pirated music, the market for legal online music has soared with the advent of iTunes and others, and the crackdown in the United States and other countries on piracy.
Surveys indicate iTunes holds more than 80 percent of the US market for music downloads and strong positions in other countries where it operates.
Apple’s iPod — which is the only player compatible with iTunes music — holds about 75 percent of the US market for music players.
Mark Mulligan, an analyst at Jupiter Research, said the move to an ad-supported model had been expected.
“This is innovative but not entirely new — it is part of a broader development of the music industry becoming more experimental and broad-minded with digital music,” Mulligan said.
“Developing ad-supported free music services is actually something we have been telling the music industry they should do for some time now.”
The analyst said this model appears to be a way to woo young music fans who are unwilling to pay for downloads and might otherwise use file-sharing sites.
“Will the SpiralFrog service work? That all depends on whether they can get the right content and grow a good audience,” he said.
“Advertisers buy access to audiences. Without a good audience there wont be an appealing proposition for advertisers which means no viable business model.”