Sunday, March 2, 2008

Expected MySpace service to compete with iTunes

By Jennifer Netherby

NEW YORK (Billboard) -
Amid ongoing competitive pressure
from Facebook, MySpace is taking its latest shot at entering
the music business as other social networking peers, such as and imeem, are making big audience gains with
ad-supported music offerings.

According to sources, MySpace is planning a service that
would combine free ad-supported music listening with paid MP3
downloads and music subscriptions.

MySpace parent company News Corp. has approached the major
labels about forming a joint-venture music site, similar to its
partnership with the major Hollywood studios for video site

The new service would be operated by MySpace and seemingly
be positioned to compete against every offering from iTunes to
subscription service Rhapsody to social networks. Details are
still unclear on MySpace's plans, but it is expected that
MySpace will build the music service on its existing social
networking base, which draws nearly 70 million U.S. users each

MySpace did not return calls for comment.

During the last year, the four major labels have warmed to
the idea of allowing users to share music on social networking
sites, inking deals with and imeem for a cut of
advertising revenue. Music is the central connector on both
sites: Users create and share playlists with their favorite
songs, find and add friends based on their music preferences,
listen to full-length songs on demand and purchase downloads
through links to Amazon and iTunes.

CBS-owned reported a 92 percent jump in U.S. users
in the span of the last month, making it one of the
fastest-growing music networks. now claims 21 million
unique visitors per month, close to the 23 million unique
visitors of rival imeem, which has also seen strong growth in
the last year.


But only a minority of consumers use social networking
sites to access music. According to NPD Group, just 14 percent
of Internet users report getting music through social
networking sites in 2007. Among teens and college-aged users,
the proportion is 25 percent.

Execs at imeem and shrugged off MySpace's impending
entrance. "MySpace is a bit late to the table, to be quite
honest," co-founder Martin Stiksel said before adding,
"MySpace is always a force to be reckoned with."

Forrester Research analyst James McQuivey predicted in a
recent report, "The End of the Music Industry As We Know It,"
that in five years social network-enabled music purchases will
be the primary way people buy music.

Stiksel believes the ad-supported model is an even better
way for consumers to get music and for labels and artists to
get paid.

"When you buy a CD, the artist and the label get paid
once," he said. "On, music gets monetized perpetually
every time someone presses 'play."'

Imeem is pushing its business as an alternative to piracy
for a young audience that isn't purchasing music.

"Social networking has the opportunity to be the best hope
for the online music experience for the fans, the artists, the
industry," imeem chief marketing officer/head of business
development Steve Jang said. "If we can do it in a controlled
way where we're getting marketing and promotion and also
revenue, that's great. It will eat away at a lot of illegal
usages online."

Music social networking still has its challenges, the
biggest being whether users will put up with ads to hear their
favorite songs. Execs from imeem and say users don't
mind ads so long as they don't get in the way of music

"They certainly have a tremendous opportunity," NPD
VP/senior analyst Russ Crupnick said. "On the other hand,
nobody has really done a particularly good job so far of
challenging Apple. The thing about iTunes with younger
consumers is that linkage back to the iPod. It's hard to
separate the device from the music storage and software

McQuivey points out that even if social networking does
emerge as a dominant model for listening to music, it could
benefit Apple by selling more music online, which could help
sell more iPods.


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