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As Music Wars Heat Up, Is the Future Really Free?

If you thought the music-streaming market was competitive already, you ain’t seen nothing yet. Change has been bubbling in recent months—particularly with the U.S. launch of

Spotify—but now things are about to boil over. Faced with the prospect that Facebook will launch a music platform next week, both Mog and Rdio are reportedly making a bold gambit: going free.

More accurately, both services—which previously required all users to subscribe—are adding a lower tier of free access to entice more users. Mog pulled the trigger first, announcing a new “Freeplay” scheme (launching Thursday) that will let users listen to a limited number of tracks for nothing and earn more plays if they are active sharers. Rdio, meanwhile, says it will launch a similar service in the next month. Mog has confirmed to GigaOM that it will, like Spotify, support the free service with advertising. It looks as if Rdio has no plans to run ads on its free version.

No ads? Isn’t that just a kamikaze business model? We know that the cost of streaming can often be prohibitive, but Rdio must be hoping it can get enough users to upgrade to subscriptions to offset the losses it will rack up in ad-free listening.

I suppose that, faced with such strong competition, there aren’t many other ways to compete. I mean, obviously, both companies have teams of engineers working on a system that can stream free music directly to your mind—but until then, it looks like free is the way in.

Or is it?

Own or Stream—or Both?

The free-streaming frenzy coincides with news from download retailer EMusic, which is pushing the results of a survey it commissioned about online behavior. Given the source, you probably need to take the result with more than a pinch of salt, but essentially it backs a novel idea: Instead of giving music away for nothing, try selling it.

The rise of streaming has led some to argue that it will eventually kill retail. The author of this piece in the Harvard Business Review, says that “over time, this model [streaming] will displace iTunes.” No doubt, such claims will receive a boost from the increase in free services.

EMusic says it isn’t so simple. The survey, which was conducted by Insight Research and came from interviews with 1,000 adult music consumers across the U.S., found that only a small number of customers saw streaming and ownership as diametrically opposed.

According to the study, 91 percent of people still “prefer to own music,” listing a number of reasons such as unlimited listening, security that their music won’t disappear, and support for artists. While only 13 percent of people surveyed pay to stream music online, the majority of them (84 percent) still buy music as well.

These tendencies become even stronger among those who count themselves as “independent” music fans, many of whom use streaming services such as Spotify, Mog, and Rdio as ways to try new music before they purchase.

It’s always worth being skeptical of surveys, but this one has to sound good to Apple (AAPL), owner of iTunes, and to Amazon (AMZN). While it may not persuade those who think streaming will emerge victorious, it indicates there’s life in retail yet.

Also from GigaOM:

Connected Consumer Q2: Digital Music Meets the Cloud, E-book Growth Explodes (subscription required)

Netflix Stock Tanked This Morning. Here’s Why

InMobi Raises $200M as Mobile Ads Heat Up

Samsung Manager Testifies to Early iPad Info Leaks

The Surge Accelerator: An Incubator for Energy and IT

Johnson is a writer for the GigaOm Network

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