Social-networking site MySpace on Thursday will introduce new music features that let users listen to free streaming audio, purchase song downloads and make playlists, the products of a joint venture with major record labels.The moves make MySpace the latest challenger to Apple Inc.'s dominance in online music distribution. The new features will be accessible on MySpace user profile pages as well as the MySpace Music page.
The four major music companies, EMI Group Ltd., Warner Music Group Corp., Vivendi SA's Universal Music Group and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG, have licensed their catalogs to MySpace and are equity partners in the venture. MySpace will also license content from Orchard Enterprises NY Inc.'s Orchard, an independent music distributor.
It remains to be seen if the initiative will help MySpace, which was purchased by News Corp. for $580 million in 2005, in its efforts to wring more revenue from its 120 million site visitors world-wide and gain an edge on rival Facebook Inc. Free audio streams will be supported through advertisements and MySpace will take a cut of downloads through a partnership with Amazon.com Inc.
About 35 million MySpace users routinely visit pages that feature music. Besides selling ads and song downloads, MySpace also plans to eventually link up with partners to sell artist merchandise and tickets to concerts. All of this will benefit big and small artists, said Amit Kapur, MySpace's chief operating officer. "We're not only going to be their home on the Web," he said. "We're going to be the place they make a living."
MySpace faces some stiff competition. Apple's iTunes store has roughly 80% of the market for music downloads, according to the company. There are also several companies that already offer free streaming music, including Imeem Inc., a San Francisco company that has 100 million monthly users.
The four initial sponsors of the MySpace Music site are McDonald's Corp., Sony Pictures, State Farm Mutual Automobile Insurance Co. and Toyota Motor Corp.. In an effort to keep ad rates higher than they historically have been, MySpace is limiting the number of slots for ads on the music site. A potential challenge in the advertising strategy: It is unclear whether users will actually pay attention to visual ads while they're listening to songs, said Russ Crupnick, an entertainment-industry analyst for NPD Group.
The record companies will get a share of revenue generated through advertising and other sources. The music industry has struggled in the digital age, as single-track download sales have failed to grow quickly enough to offset a precipitous decline in CD sales. A guaranteed stream of income from big advertisers is viewed as a potential step in the right direction.
MySpace executives are still looking for a chief executive to run the music venture, whose group ownership makes the job as much a diplomatic mission as an executive role. The company also has been recently looking to raise about $100 million to $200 million in equity financing for the music operation, people familiar with the matter say.
By: Amol Sharma
Wall Street Journal; September 25, 2008
