As expected, MySpace unveils new music service

Executives from MySpace officially announced the creation of MySpace Music, a service that will be jointly operated by News Corp.'s MySpace and, at least initially, three out of the four top record labels.

The Thursday morning teleconference MySpace held with the press was anticlimactic since details about the service have been leaking for weeks.

The service will roll out gradually over the next three to four months and offer free streaming music, unprotected MP3 downloads, ringtones, and e-commerce offerings such as merchandise and ticket sales, said MySpace CEO Chris DeWolfe. The goal is to make MySpace a one-stop shop for everything music. Among the top four music companies, EMI was the lone holdout. A source with knowledge of the negotiations said that MySpace and EMI continue to seek a deal.

(For more on what lies ahead for EMI, read what the incoming chief of its digital unit, Douglas Merrill, had to say in this interview with CNET News.com from Wednesday: "Will former Google exec help save the music industry?")

The partnership with MySpace is another sign that the music industry has decided to embrace the Web and digital technology instead of waging war against it. As CD sales continue to shrink and piracy expands, the labels are moving toward the inevitable: a redefining of how they make money from music. With MySpace Music, the labels will get an equity stake in the new joint venture and a share of all the revenues the service collects.

To this point, none of the challengers to Apple's iTunes has been able to gather an audience of any relevance or able to cut licensing deals that would provide them with a music offering that equals or surpasses Apple's.

That changed today.

MySpace has 110 million users, 30 million who listen to music on the site. Combine those numbers with the 5 million music acts that promote themselves on the site and MySpace already has impressive music credentials. James McQuivey, an analyst with Forrester Research, said MySpace could help modernize the music industry.

"MySpace has the audience and environment to enable the music industry to get to the next digital level," McQuivey said. "What iTunes offers is a good buying experience but that's not all people do with music. They they talk about it, they share it, they try things out. Remember, this is the kind of activity that (record label) Universal Music Group was suing MySpace for previously."

McQuivey continued: "I think the labels said to themselves,'Oh, if we enable fans to have a fully immersive experience, they might spend more on music. MySpace can offer a place where all aspects of the music experience can be expressed. Imeem was getting close to this but MySpace, if they don't mess it up, should take the music industry to Music 2.0"

Thomas Hesse, president of global digital business at Sony BMG Music Entertainment agreed that part of what attracted the record companies to MySpace was its audience.

"MySpace is already one of the largest music communities on the Internet," Hesse said during an interview with CNET News.com "We're aligning our efforts to reach fans through every conceivable platform."

DeWolfe did not disclose what prices might be, nor would he disclose information about the status of a copyright-infringement suit brought MySpace by Universal Music last year. A source said that the suit was settled for a large sum.

Although DeWolfe declined to discuss financial terms of the deal, the source said that it is non exclusive, meaning that the labels are free to make similar arrangements if they choose. Facebook has been reportedly talking to the labels about launching its own music service.

[David Dudley]

assumptions

The folks at MySpace assume that a user who is listening to music for free (which they are) will somehow convert into a music purchaser. Most people go to MySpace for the sexuality in their attempts to hook up with other MySpacers. While the music is the angle that MySpace, Fox, etc spin, it is obviously not the case.

On the other hand, people go to iTunes EXCLUSIVELY for media which is conveniently tied to the best selling hardware in the business. There are alternatives to iTunes such as Amazon's offerings and certainly other media stores that sell mp3s that lack DRM, but they have amounted to nothing, regardless of user base, marketing efforts and the like. While this will be a valiant effort on the part of MySpace and the music labels, they have a massively uphill battle converting freeloaders to music purchasers. Just look how miserably their Snocap integration went.

Best of luck, chaps.

[joshua.guffey]

Why comply?

Myspace is in a unique place, they drive most of the traffic on
the entire internet, If it were me at the helm I think i'd say
"screw the major labels" and start offering music for sale from
the record labels that actually want to sell their music on
myspace. There are plenty of indie labels that would benefit
from being able to electronically distribute their music to
customers. Why would myspace be willing to pay millions to
settle a law suit with these majors, then turn around and pay
them more just to sell their music?
If the major record labels want to be stubborn- go around them
in my opinion it would be better for everyone in the long run.

[David Dudley]

Old men piloting a sinking ship

I think that MySpace had to get buy in and licensing from the major labels in order to sell their wares. They didn't want to be another QTrax who could not actually deliver music to customers.

MySpace has attempted to offer unsigned artist music via Snocap integration, but it only offered DRM'd WMA which as you know, WMA has absolutely no market penetration whatsoever.

MySpace and the labels believe that with their user base, they can convert people who simply listen to music into paying customers and take out or at least weaken the iTunes juggernaut. The problem is that lots of people have attempted this and *all* have failed (Walmart, Amazon, Buy.com, Napster v2, MTV, Real and lots of other failures not worth mentioning).

The major labels are outdated, dinosaurs protecting their ancient, outdated business model. This is their attempt to get modern and stay in control. If they only understood their customer, but you know, when you were raised in the 40 and 50s when TVs were seen as magical boxes, you'd probably have the same limited perspective on consumers.

[AppleSuxLeo]

Who needs iTunes/Myspace ??

Amazon beats them on price(45-99cents), quality(256-320KBPS) , and most importantly , all their music has NO DRM. And it is well known that iPod sales are slowing quite a lot. Millions of people have no interest in a site that caters to tweens with a double digit I.Q. or a site that locks you in to one device. Imagine if CD`s would only play in one device brand ? That would NEVER fly. You get the idea. Amazon and HULU is all I need , and Amazon is growing the fastest. Thinking iTunes will remain dominant is akin to thinking the Model T would remain the dominant car.

[g15host]

What Do Musicians Say?

The music industry have had 5 years to figure a way around
Apple and couldn't do it because they're morons, as evident by
the lack of true musical innovation promoted in nearly a decade.
Why would Myspacers who already use iTunes/iPod change if
the Apple software/hardware/UI give them the best experience?
And those already get music for free, why would they start
paying now?

Amazon is the Walmart of the Internet. Thanks for supporting
the artists with 50-cents a song and killing my local books and
record store. Amazon only succeeds because of their website is
nicely engineered. If not for that they'll just be another reseller
going down like Dell.

I use iTunes for free radio and rip CDs that I buy - yes I'm old
enough to remember buying CDs in stores and I will pay for CDs
if the music is worth it - directly from the artists websites. What
makes these company execs think people go to MySpace if not
for everything is free?

[whocares_dude]

grammar

To the author - please learn to use proper grammar. Perhaps others disagree, but when you say "the labels are moving toward the inevitable: a redefining of how they make money from music", one might instead use the word "redefinition". That's what it's there for. If you spent your time getting an English or journalism major, put it to good use.