In a move that will put it in direct competition with Apple’s iTunes, MySpace announced Thursday that it is creating an online music store that will allow its legions of users to buy and stream millions of songs.MySpace, the world’s largest social network, said it was forming a joint venture with three of the four largest music labels, which will power its beefed-up music platform called MySpace Music. MySpace officials said the joint venture is a natural extension of MySpace’s music heritage and a dramatic shift in the way consumers access musical content.
By embedding a store in a social network, officials hope to create a more dynamic connection between artist and consumer, one that will ultimately lead to more robust sales of music and related items.
MySpace music fans already have built up strong relationships with their favorite artists by visiting their MySpace profiles, where they can read lyrics, view information and upcoming concert dates and stream a handful of songs or videos. Users will now be able to buy music – much of it without digital rights management protections – purchase ring tones, stream a larger number of ad-support songs and videos, and even purchase merchandise and concert tickets right from an artist’s MySpace page. It’ll be a one-stop shop for all things music-related, MySpace executives said.
“What we’re talking about is creating a much richer experience that incorporates music downloads as just one component,” said Chief Operating Officer Amit Kapur. “Now people will experience music online in a radically different way. It will be become much more mainstream.”
MySpace takes the lead
The terms of the deal were not released, but the agreement calls for MySpace to head up a new company that includes board members from Sony BMG Music Entertainment, Universal Music Group and Warner Music Group. EMI, the lone major holdout, is reportedly in talks to join.
The joint venture, which will roll out in the coming months, provides a potential heavyweight competitor to Apple’s iTunes, the largest online music store. MySpace boasts 110 million members, 30 million of whom already visit MySpace’s music platform. MySpace also has more than 5 million artist profiles, including many unsigned and independent performers.
For the music labels, the partnership with MySpace highlights their growing acceptance and embracing of online distribution. It also provides them with an alternative to Apple, which has done a lot to set the pricing of music online through its leadership position, often to the chagrin of music executives.
Record industry leaders said the MySpace deal gives them an innovative way to reach consumers, one that may change the way they sell their music. That’s important, because sales of music slipped from $15 billion in 1999 to $11.5 billion in 2006.
“We believe that one of the greatest growth opportunities for our industry is to develop new partnerships and models focused on unlocking the value of music in the online community space,” Edgar Bronfman Jr., chairman and CEO of Warner Music Group, said in a statement. “This venture may provide a defining blueprint for this next important stage in the evolution of social media, benefiting consumers, artists and music companies alike.”
Going for younger crowd
Susan Kevorkian, an analyst with IDC, said MySpace Music offers labels an effective way to target younger online customers, especially those who are likely to be downloading music illegally. She said the sharing and recommendation inherent in social networks can help drive sales among users who have been slowing their music purchases lately.
“It’s a new way to appeal to younger consumers who have been the biggest users of file sharing networks. Some of them have been disillusioned by the recording industry’s lawsuits against file sharers,” Kevorkian said. “This is a new way to cultivate relationships with this group.”
Kevorkian, program director for consumer markets at IDC, said the new music service might give Apple pause and it might prompt it to work more closely with the record companies, which have pushed for more flexible pricing on iTunes songs and albums.
David Card, an analyst with JupiterResearch, called the deal a “keystone event” that could shake up the digital music world. But he wrote in his blog Thursday that there are plenty of questions about the experience users will have when accessing ad-supported content. Will the ads be intrusive and will the advertisers unlock a large library of free content?
And he said it’s still an uphill climb selling songs online.
“Amazon’s got a great digital downloads store, and it’s a retailer, and it doesn’t seem to have juiced digital download sales yet,” Card wrote. “Still watching that one.”
