Music wars heat up — but is free really the future?

Busker under CC license by Flickr user Johnny_Boy_AUpdated. If you thought the music streaming market was competitive already, you ain’t seen nothing yet. Things have been bubbling up in recent months — particularly with the American launch of Spotify — but now things are about to boil over. Faced with the prospect of Facebook launching 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 in. 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. And unlike Spotify, it looks like both will not support their free activities by running advertising. Mog has confirmed with GigaOM that it will, like Spotify, support the free service with advertising, while it looks like 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 both companies Rdio must be hoping it can get enough users to upgrade to subscriptions to offset the losses the companies¬†it will rack up in ad-free listening.

I suppose, faced with such strong competition, there aren’t that 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?

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

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

But 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. And while only 13 percent of people surveyed pay to stream music online, the majority of those (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 like Spotify, Mog and Rdio as ways to try new music before they purchase.

It’s always worth being skeptical of surveys, but noises like this have to sound good to the likes of iTunes and Amazon (s amzn) — and while it may not be enough to those who think streaming will emerge as the only true victor, it indicates there’s life in retail yet.

Busker photo used under Creative Commons license, courtesy of Flickr user Johnny_boy_a