MySpace launches music service

Years from now, when the pundits talk about the turning point for digital music, they will point to the launch of MySpace Music.

The partnership between the music industry and News Corporation's social networking bellwether, unveiled on Thursday, is much more than a monetisation play. Sure, labels were drawn primarily to MySpace's 110 million members and 30 million unique monthly visitors. But what's emerged from the MySpace Music service is the labels' long-needed submission to the will of the consumer.

It's been a long time coming. First came the slow crumbling of the digital rights management wall. Then, the gradual acceptance of free online streaming in return for advertising revenue. To be sure, the MySpace deal would not have come about had not Amazon, imeem and Last.fm preceded it.

But MySpace Music is the sole service that not only combines all the ad-supported free streaming and Digital Rights Management (DRM)-free download capabilities of these earlier services, but also adds related products like concert tickets and merchandise.

By finding a way to monetise the manner in which consumers are already interacting with music rather than trying to force them into a business model convenient to the industry, the record labels have finally tapped a vein of hope for their struggling fortunes. Warner Music Group chairman/CEO Edgar Bronfman Jr. perhaps said it best in his statement distributed with the MySpace Music press release: “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.”

The implications of this blueprint are significant. First, it marks the end of the digital warehouse model like iTunes and Amazon. Both will remain important contributors to the industry's revenue for the next several years, but that model is fading away and we are unlikely to see new, similar services come to light.

Second, subscription services like Napster and Rhapsody are even more vulnerable. They should have worked to integrate their service more deeply with an existing social network (as Rhapsody is trying to do with MOG) before those social networks develop their own solution like MySpace just did. They need to immediately find a way to eliminate the monthly fee in favour of ad revenue and switch their a la carte stores to DRM-free files.

Third, all eyes are on Facebook. The company is already talking with the major labels about a similar music service to MySpace's play, and that effort may gain steam now that this blueprint has been established. Facebook will likely add its own bells and whistles, but the model for the industry should look much the same.

Finally, all prospective digital music services must accept that working with the music industry today carries a new price – equity. MySpace Music is a joint venture that the labels partly own. Imeem gave away a similar equity stake as well. Certainly negotiations are necessary to determine a fair split, and the labels must remember they're not the only ones bringing value to the table; but the digital music market of tomorrow will very much resemble a partnership between content and distribution.

“Attitudes have changed,” MySpace CEO Chris DeWolfe says. “I see all the executives at the major record companies getting creative and thinking outside the box. It was just a perfect storm where we wanted to make a big move, they wanted to make big moves, so we just came together and got this done pretty quickly. It's pretty amazing.” (Reuters