MySpace Seeks Venture

News Corp.'s MySpace in recent weeks has held talks with major record labels about an online service that would let users listen to music free, as long as they do it at their computers, according to people close to the situation.

The service, tentatively dubbed MySpace Music, would likely be structured as a joint venture between the social-networking service and participating labels, the people said. Outside investors might be brought in to fund the operation, these people said.

MySpace declined to comment.

The move would represent a vote of confidence for two nascent trends in online music: free streaming and downloads sold without copy-protection software.

The labels approached by MySpace include Vivendi SA's Universal Music Group, Warner Music Group Corp., EMI Group Ltd. and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG.

The talks come as MySpace is stepping up its efforts to position itself as more of a media company than a social-networking site, in part to distinguish itself from faster-growing competitors like Facebook Inc.

To broaden its selection, it has been turning to partners. MySpace recently launched a new area of its video site powered by online video service Hulu, a joint venture between NBC Universal and News Corp.'s Fox unit. The offering could serve as a model for how MySpace is aiming to tie its new music joint venture back to music fans on MySpace.com.

The new proposal isn't fully fleshed out, but people familiar with the plan said it is likely to include both free, streaming music and paid MP3 downloads, which can be played on virtually any portable device, including Apple Inc.'s popular iPod.

The streaming service would be supported by revenue from advertising sales, which would be split with the labels, these people said. MySpace executives have also discussed the possibility of selling merchandise like T-shirts through the service, and of running a paid subscription service that would let users play rented music on some specially configured portable devices, though probably not on iPods, these people said.

Universal Music and MySpace are locked in a copyright-infringement lawsuit that would most likely need to be settled before any agreement could be reached on a new service. The two sides have been talking but it is unclear when a settlement could be reached.

By Ethan Smith and Jessica E. Vascellaro
Wall Street Journal; Feb. 20, 2008