As we’ve seen with Spotify’s struggle to get itself launched in the US, imeem’s demise, and Lala’s fire sale acquisition by Apple, free music streaming sites don’t have the most successful track record.  But Free All Music and Guvera are tackling that problem – and maybe they’ll even succeed.  The Associated Press has reported that the two companies are going to rely on bigger advertising dollars to get by.

Both Free All Music and Guvera have lured advertisers that will pay more $2 for a minute of airtime on their sites.  According to the AP, this will make them about the same amount of revenue as they would get if they charged your $1.29 for a download.

Successful services like Pandora allow free usage that is sponsored by ads.  Their premium packages are ad-free for paid subscribers.  Free All Music and Guvera are asking for a moment of your time in exchange for free services.  Free All Music’s CEO Richard Nailling says, “You pay for the song by paying attention to the advertiser.  It’s a fair trade of attention for music.”  And no quiz, so you can kind of zone in and out if you want.

What has kept other free sites from working is the crippling licensing fees they must pay (sites usually pay licensing fees of about 70 percent per song downloaded, which has been unsustainable with free sites).  The advertising money doesn’t cover it.  Free All Music and Guvera have signed with Universal Music Group, EMI, and two indie labels (Sony hasn’t signed on yet).  With the bump to $2 ads, this may help keep these two services afloat.

Some advantages the sites are offering music listeners, in exchange for a moment before each free song, is that they can play their downloads on any device, they don’t have to check back in with the service to keep their songs from expiring (as was the case with SpiralFrog), and everything is much more controlled.  How so?  Right now, both companies are in testing phases.  If you want to join, you have to register.  You’ll be placed on a waiting list.  During that time, the sites determine if there is enough advertisers to pay for the projected amount of downloads, and if there is, you’re in.

Claes Loberg, Guvera’s founder and CEO, says, “Everything’s about a controlled, sort of old-school business model of: build one product, find one customer, sell it.  Then build to products, find two customers, and sell it…If we have enough to support a million people, that’s all we’ll open the door to, even if we have 5 million sitting in the background waiting to get in.”  Rather than having X amount of ad dollars and YYYYY amount of customers demanding songs, which has led the previous free streaming model to combust.

So how do these two sites manage to attract higher advertising dollars?  They help the ads target consumers.  When you go on Free All Music, for instance, you are given a choice of advertisers, from Coke to Zappos.com.  You can select on retailer’s ad to view.  Then, you get your song. You can download it, it’s yours. You’ve paid with a minute of your life – not bad if you like the song.  You get a max of five songs per week, which is reset each Tuesday.

At Guvera, you fill out a profile, which includes info on your favorites from any number of categories (favorite foods, music, shampoo, whatever).   This allows advertisers to target you based on your interests – but you do get credits to spend on music.  Then, it works like Free All Music. You select on advertiser, watch the ad, then get your song.

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Spotify is Europe’s biggest and most recognizable subscription music service, with over 8 million users. Part of Spotify’s service includes the ability to share music through different transporting networks, offering users the option to choose how they want to access royalty free music. According to Spotify’s website, “there are no restrictions in terms of what you can listen to or when. Forget about the hassle of waiting for files to download and fill up your hard drive before you get round to organizing them. Spotify is instant, fun and simple.”

Daniel Ek, owner founder of Spotify, recently pleaded with the Swedish music industry not to charge high royalty fees for streaming music services, but to try and plan a system where money is made through a number of different routes, instead. According to IBTimes, Ek suggested such feasible routes as music downloads, advertising, merchandising and tickets to live events. Ek’s fear is that high royalty music fees would cause online music businesses, such as Spotify, to fail.

Right now, royalty free music services are relying mainly on advertising revenue in order to survive. Spotify’s future looks “spotty” at best, and is going down the same road as Napster did 10 years ago. Napster was the original royalty free music pioneer, offering free music downloads and music-sharing capabilities between users. Music executives and artists from all over the world joined in the fight to shut Napster down. Eventually, Napster became a paid-subscription service but lost out to bigger and more powerful services such as Itunes. Unlike Napster, Spotify cleared the rights to all of the music it offers online. But, the royalty fees are a heavy price to pay.

Spotify does not want to become the next Napster, and Ek is fighting hard to keep royalty free music alive and well. There are a variety of royalty free music services available online. But if royalty fees increase and regulations intensify, you will see those services decline and eventually they will cease to exist.