Record Companies Link Up With MySpace
Friday, April 4, 2008
Three of the world's top recording companies are entering a joint venture with MySpace, the nation's largest social Web site, to create a service offering free music streams and paid downloads for the millions of members of the online hangout.
The partnership reflects the deep changes technology has wrought on the music business and the commercial possibilities of rapidly growing social-networking sites. The goal of the venture is to become an online destination where visitors can not only recommend and discover favorites with one another -- as MySpace members already do -- but also sample or purchase songs and buy concert tickets and ringtones.
The effort would pose competition to Apple's iTunes, a music download juggernaut fueled by the success of that company's iPods.
"We believe the Web is becoming more social, and MySpace Music is a new way of consuming music online," said Chris DeWolfe, co-founder and chief executive of MySpace.
Apple declined to comment except to note that iTunes is the nation's biggest music retailer, having recently overtaken Wal-Mart. Amazon.com also entered the music download business late last year.
"We launched iTunes less than five years ago, and it has now become the No. 1 music retailer in the world," said Eddy Cue, Apple's vice president of iTunes, which has sold more than 4 billion music downloads.
The decision by the three major companies -- Universal Music Group, Sony BMG and Warner Music Group -- to jointly enter the digital download business represents what some analysts consider a turnabout in the music industry's defensive approach to the technology.
At the outset of the digital music phenomenon, the industry feared piracy and sued the maker of one of the first MP3 digital music players. It sued Napster and other music-sharing Web sites, then created digital copyright protection systems known as digital rights management, or DRM, which many audiophiles shunned for its inconvenience. The recording industry also sued thousands of individuals for downloading music without authorization.
"The industry spent all its time and energy preserving an increasingly irrelevant business model and pleasing executives by publicly suing its customers," said James L. McQuivey, an analyst at Forrester Research.
The MySpace music store represents a step in the right direction for the industry, he said. "It recognizes that consumers don't just buy music, they experience it, which is a much larger concept. They share, they discover, they heckle, they even use it to self-identify."
McQuivey said he does not expect the venture to affect Apple for the first few years because of the strength of the sales of Apple's devices.
The fourth major recording company, EMI, has not signed on with MySpace. MySpace officials said music from independent and unsigned artists may be distributed from the site as well.
For MySpace, the venture could answer some of the questions that have arisen regarding how the owners of social networks can profit from them.
MySpace officials said the venture, to be rolled out over the next three or four months, would include "new monetization and revenue models." They declined to describe them in detail, but said that aside from advertising, they will receive some of the distribution fees for music and related merchandise.
"This new social way of experiencing songs is the next big thing in the history of music," said Amit Kapur, chief operating officer at MySpace.