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.
Guest post: Editor's note: Music attorney Chris Castle is all for finding a way to boost the music industry out of its current nosedive. But bundling music charges into ISP bills is not the way to go, he says.
Jim Griffin's idea sounds very much like the Lawrence Lessig-William Fisher "alternative compensation scheme" that has been around for a long time. Griffin's proposal is voluntary, like the version proposed by the Electronic Frontier Foundation, (which advocates for Internet rights).
There are many problems with the system, but here are three:
First, Griffin's plan produces a disaggregated chunk of money that is collected based on headcount, not based on music usage. One way to divide up that money that advocates often raise is based on some kind of sampling of usage (I think I've heard the Electronic Frontier Foundation talk about the sampling method used by the American Society of Composers, Authors and Publishers as a proxy. If you are going to sample peer-to-peer or BitTorrent files, you need to identify tracks. That can be done with fingerprint technology, and there are several companies out there that do that.
However, if you can identify the tracks on P2P systems enough to sample, you can identify the tracks enough to block and filter. So why not give copyright owners that right? The Portfolio.com story seems to say that Warner Music Group intends the system to cover all the world's music, but that must be a typo, for Warner Music obviously can only speak for its masters and the compositions they administer (even that is subject to artist and writer consent in many instances).
If you are going to divide up the disaggregated sum collected the Griffin's system on a method not based on sampling, then what exactly would that be? I call this the "Carl Sagan Scheme" because it promises "billions and billions" of dollars to the creative community. It also ignores what I think will be billions in the transaction costs of implementing the scheme--ISPs won't do this for free, and will want protection from copyright infringement claims of any stripe.
It's also important, for obvious reasons, that the company holding the data be "Swiss." I doubt that the labels would allow one of their number to control it, and a joint ownership scheme would face an inevitable antitrust challenge if the others were involved.
In order to be effective, Griffin's plan would require amending the Copyright Act. A voluntary plan is unlikely to attract a sufficient number of copyright owners. But without all copyright owners, ISPs and their users would still be exposed to claims of copyright infringement. If you think that gaining relief from prosecution is an incentive for ISPs to adopt this complicated plan, then you would, I think, assume that ISPs would want to protect their users from all claims for copyright infringement.
Which leads to the second problem. In order to get that global protection for users requires amending the Copyright Act. Without amending the Copyright Act, you will always have the "lone gunman" problem, or the copyright owner you missed getting permission from. It's tough enough to amend the Copyright Act on things that people agree on, and you'll never get anyone to agree to amend the Copyright Act on things that people are bitterly opposed to, such as Griffin's system.
In addition to these problems, if you go down the route of amending the Copyright Act, which seems to be the only realistic way to accomplish what Griffin desires, there are people who say such an amendment would violate the U.S. government's treaty obligations, such as the Berne Convention, the TRIPS Agreement, and NAFTA.
Also, it's likely the rest of the world may have a problem with Griffin's system, even if it's a voluntary system. A similar system was resoundingly defeated in the French Parliament, and President Nicholas Sarkozy has clearly come out against any such ideas. One reason is that it is hard to put a border on the plan, but this is really a worldwide solution that Griffin seems to be proposing.
We have only been focused on issues affecting artists and songwriters, but ISPs and P2P operators will likely have many other negative reactions to the plan. I can't imagine the Pirate Bay signing up for this.
It's a head scratcher, that's for sure. I'm sure there's a lot more to it than has come out in the exclusive interview.
There must be.
There are a lot of smart people at Warner Music, and I'm sympathetic to their desire to keep an open mind about possible new business models. But this one is old news and has not been well received in the past, so seems unlikely to bear fruit.
I was just reading through my daily news feeds when I came across this interesting little nugget of information from Techdirt.
According to the site, the Vancouver Sun gave away free compilations of songs from artists on the Nettwerk record label in an attempt to appeal to readers and make the newspaper a bit more popular. So, after reading this, I can't help but wonder--can free music downloads save newspapers? I think they can.
... Read moreDon Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Steve Jobs demonstrated on Wednesday why Apple is snatching away the music business out from under the record labels.
Just days after Rick Rubin, Columbia Records' co-chairman, outlined some of his ideas for saving the music business--several that are dated and ignored by the public--Apple blows in with a new distribution model.
Apple announced at the company's press event on Wednesday that it launched a new Wi-Fi store in partnership with Starbucks. Each time an owner of an iPhone, or new iPod Touch enters a Starbucks, a button will appear on their device that enables them to buy music from the Wi-Fi library. They can download a song--without having to log in--by whatever artist Starbucks is featuring at the time, or music playing on the store's sound system or any other they can find in the library.
The service, scheduled to start in Seattle and New York on Oct. 2, is apparently designed to boost song sales. Much has been written about how iPod owners typically buy about 20 songs after first obtaining an iPod and then it's all about ripping music to the device.
Here's the beauty of the partnership with Starbucks: some investment banker or dog walker enters their favorite Starbucks, hears a song they like and with a few button pushes, it's on their iPod. It's an impulse buy. Cool song, only 99 cents, I can listen to it again as I sip. And the very next day, that banker or dog walker is likely to return, handing Apple another chance to market music to them.
That's partly why Starbucks has become a music-retail power. According to a story last month in the Financial Times, the coffee chain was responsible for nearly half of the 511,000 units sold of Paul McCartney's Memory Almost Full.
At the end of 2006, Starbucks operated more than 12,000 stores worldwide and generated $7.8 billion for the year, of course most of that is from coffee sales.
So Jobs has plopped iTunes down in physical stores all over the world and makes it easier than ever for consumers to buy music.
Meanwhile, Rubin, a music producer who has worked with the Red Hot Chili Peppers and Jay-Z and who has recently turned record executive, is pinning his hopes on music lockers, according to an interview that appeared on Sunday in the The New York Times Magazine. Music lockers have been called jukeboxes in the sky.
They allow users to store their music on host servers which can then distribute songs to wherever a listener can connect to the Web.
Companies like MP3tunes.com have tried this and have yet to attract a significant audience.
It's time once again for negotiations to begin between Apple and the record labels, but things are a little more interesting on this go-round because of Apple's recent deal with EMI.
Apple's Steve Jobs and EMI's Eric Nicoli discuss the companies' DRM-free tracks last month.
(Credit: Wireimage.com/EMI)For years, record companies have been trying to get Apple CEO Steve Jobs to raise the price of individual songs sold through the iTunes Store, but Jobs has stuck fast to the 99-cent fee, The Associated Press reports. Last month, however, that stance changed with plans to make versions of songs from EMI's artists available for $1.29.
The catch? Those songs have to be free of digital-rights management technology, which is loathed by consumers but loved by the music industry as part of their attempts to put an end to music trading. While EMI jumped onto this plan, it's not clear that the other labels will follow suit and drop their insistence on DRM unless Jobs agrees to sell more "bundles" of songs, videos, and other media designed to inflate the overall price of obtaining a track, the AP said.
Last year, the labels caved to Jobs' insistence on the fixed 99-cent price and signed one-year deals. It's not clear exactly what will happen this year, but as the dominant source of legally available online music, Apple holds a lot of clout. Stay tuned: the iTunes Store could wind up looking very different this summer.
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