MySpace launches music service

Major labels, networking site team on venture

Is MySpace the cure for what ails the major music labels?

Sony BMG Music Entertainment, Universal Music Group and Warner Music Group hope it is. The three label giants have formed a joint venture with the Internet behemoth to weave their vast catalogs of tunes into the fabric of MySpace’s thriving online community of music enthusiasts.

MySpace co-founder and CEO Chris DeWolfe called the deal to create MySpace Music “a historic step” for the music biz in its long struggle to come to grips with the digital era. MySpace Music will be jointly owned by the four partners and have a dedicated management team that will report to DeWolfe and a board comprising reps from Sony BMG, UMG and WMG.

“This is the first time the music companies have gotten together and said, ‘We’re going to do something really different,’ ” DeWolfe said. “We believe that this is really a historic step in the music industry redefining itself, both with the partnership and the product (to come). There’s no other product on the Internet that looks anything like this.”

The partnership will extend beyond making music available for sale online, as Apple has done with its iTunes Music Store. The MySpace Music venture envisions making music and related content — from concert tickets to T-shirts and other merchandise — easily accessible to MySpace’s 110 million users through its dedicated music and voluminous artist profile pages, which draw about 30 million unique users a month.

MySpace users will have the leeway to create on their individual pages free playlists from the labels’ catalogs of songs, which can be shared with other users, and of course purchased with a click of the ever-present “buy now” button.

Thursday’s announcement was long on vision and short on specifics. The partners would not comment on the ownership structure of MySpace Music or how revenues would be shared among the partners. DeWolfe emphasized that the venture’s business plan was developed “collaboratively” so that “both MySpace and the labels will make money.”

The partnership with MySpace reps an about-face for UMG, which sued the social networking service in November 2006 for copyright infringement, claiming that certain areas of the site were “a vast virtual warehouse for pirated copies of musicvideos and songs.” (It was unclear Thursday whether that litigation is still pending.)

As for other labels joining in with MySpace music, DeWolfe said the company was “talking to everyone” about the venture, as potential partners or content providers. As the fourth major label group, EMI’s absence from the venture was conspicuous. A spokeswoman for the company did not return a call seeking comment; DeWolfe reiterated that the venture was open to other partners but would not comment on whether it had specific talks with EMI.

Music biz analysts said the announcement was a good sign that the labels realize something needs to be done to stem the double-digit slump in CD sales in recent years. Last year, albums sales, physical and digital, dropped 15% from the previous year, marking the seventh consecutive year of decline (Daily Variety, Jan. 4).

“There’s no doubt from a music standpoint, MySpace is a key destination for consumers around the globe. And the music industry has failed to create any kind of (music) community on their own, so this seems like a unique opportunity to leverage the community MySpace has built around music,” said Richard Greenfield, media analyst for Pali Research.

Greenfield noted that MySpace and its ilk have helped weaken the clout of the major labels by putting unsigned and cult-fave artists on the same playing field as label-backed acts through the social network’s recommendation and user-favorite tagging features.

“From a macro standpoint, it’s certainly a realization that the existing business model of the music business is completely broken,” he said. “The CD is dying.”

But it remains to be seen how much the exposure and accessibility via MySpace will help labels move the goods online, and whether that can offset the losses from plunging sales of physical recorded music products, especially if the labels offer unfettered free streaming of tunes as a kind of sampler course. Another question is whether the MySpace Music content will be compatible with iPods and high-end cell phones, Greenfield said.

DeWolfe said the joint venture stemmed from MySpace’s research on its users and the kinds of options and functionality they wanted from an online music hub. After spending a lot of time in focus groups asking users to describe their “perfect experience,” MySpace brass approached the labels to devise a business plan and joint-venture terms, which have been in the works for about six months, DeWolfe said.

For MySpace, the bid to strengthen its appeal to users as a music destination will only enhance the site’s value of advertisers targeting young music aficionados, DeWolfe said. The changes to the MySpace music pages and artist profile pages will roll out gradually over the next two or three months, he said.

“We’re starting with a huge head start in that we’re already big in the music community,” DeWolfe said. “Now we have all of the content to layer into the community. We will affect music history.”

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