Music The MySpace Way Hits the Web
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NEW YORK -- News Corp's (NYSE: NWS) MySpace, the world's largest social networking site, on Wednesday unveiled a long-expected joint venture with all four major music companies in a bid to compete with Apple Inc's market-leading iTunes store.
MySpace Music is designed to win fans with a mix of unlimited free music, comprehensive music catalogs, concert tickets, merchandising and other entertainment features.
The launch of the new service had been dogged by speculation on the start date and the ongoing search for a chief executive.
MySpace Music also signed late licensing deals with The Orchard, a large distributor of independent music from hundreds of small labels and music publisher Sony/ATV, a joint venture between Sony Corp and pop star Michael Jackson.
In April, MySpace confirmed it agreed to create a joint venture with Vivendi's Universal Music Group, Sony BMG Music Entertainment and Warner Music Group.
The majors agreed to take small equity stakes in the new business at a ratio which approximately reflects their respective market shares. This would mean Universal would have the largest stake and EMI the smallest.
The labels, who are struggling with shrinking recorded-music sales, are keen to benefit from the overall diversified revenues of MySpace Music -- making money from premium advertising, music download sales via Amazon.com (NASDAQ: AMZN), ringtones and eventually concert tickets and merchandising.
MySpace itself sees driving premium advertising through its service by understanding users' interests and has signed major advertising deals with McDonald's, Toyota and State Farm Insurance.
"We see ourselves as a social port where we filter information based on what's of interest to you," MySpace COO Amit Kapur told Reuters in an interview.
The music industry has become frustrated with the dominance of Apple (NASDAQ: AAPL) in the music business through both iTunes and popular iPod music player.
Music executives have said the refusal of iTunes to agree to variable pricing, rather than pricing every song at 99 cents or selling all albums as individual songs, has harmed sales and their bottomline.
One executive, who spoke on condition of anonymity, said the labels will try strategies such as giving exclusive album releases first to MySpace to help support the new service in which they now all have a vested interest in helping to succeed.
"MySpace Music gives fans a reason to buy music on somewhere other than iTunes," said the executive. "ITunes is a very static proposition and doesn't aid discovery of new music like a MySpace community."
Since its beginning, music has been one of the strongest attractions of MySpace, particularly for up and coming artists. In the last few years, major name artists have also taken to promoting their songs and albums through the site's artist pages.
But until the creation of MySpace Music, there had been few avenues for artists to sell their songs or other related music services.