I've been going by this philosophy for the past couple of years, primarily through the TST Reverbnation site, and it has worked. Of course, the best way to gain new fans, is to get in the van, criss-cross the country, and play yer butt off every night, but right now now I'm speaking of internet marketing. Over the past two years, the TST "online" fanbase has grown by approx. 3000 people, largely due to the offering of free music. An "online' fan is different than a fan who comes to your show ( although there is obviously some crossover), in that they tend to be more of a casual fan. This isn't always the case, but until someone buys your music, or buys a ticket to your show, they are not a "true" fan.
That being said, online fans play an important role in any band's marketing strategy. They "like" your facebook page, they follow you on twitter, they share your music with their friends and followers. This means free advertising for you. So, really you aren't giving music away for free. It's more of a barter system.
There are a couple of sites I've come across recently that give away free music in exchange for email addresses or sharing links:
NoiseTrade - This site offers free albums in exchange for email addresses. There is also a tip system where the listener can pay the artist what they think the music is worth. I've just put up my acoustic EP - Living Room Session. I see this site as having great potential for posting live concerts, studio outtakes, and extra content. I'm kind of against giving away an album for free, and then turning around, and trying to sell it to someone at a live show. I say all free or all pay. But that's just me.
Viinyl - This site offers singles in exchange for email address or for a "like" or tweet ( depending on how the artist sets it up). I've set up our page so you can download "The One" for free in exchange for a like or tweet. Cool design to this site, though they do need to add some sort of search or genre listing.
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