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MySpace Music Store Is New Challenge for Big Labels
So far none of the companies that sell music online have emerged as serious competitors to the iTunes Music Store of Apple Computer. But not one of them has an audience like MySpace, which millions of teenage and twentysomething music fans visit every day.
For the music industry, which worries about Apple’s dominance of the online market, a MySpace music store could present difficulties of a different sort.
MySpace, the online community site owned by the News Corporation, said on Friday that it would sell music through a partnership with Snocap, a technology company started by the creator of Napster, Shawn Fanning. When the online store opens this fall, it will allow bands and labels of any size to sell songs online for whatever price they want.
For the independent-label bands and unsigned artists who have found MySpace to be an effective and inexpensive way to spread the word about their recordings and concerts, a store on the site will be an important outlet.
With more than three million pages devoted to a variety of performers, from unknown garage bands to Bob Dylan, MySpace is already an important online venue for musicians.
“Instead of going to iTunes and searching for music, which happens once in a while,” said Tom Anderson, president and co-founder of MySpace, “you can see the band and buy their music.”
But for the four major labels, which must approve each retailer that sells digital versions of their music, the new store could represent a challenge.
The MySpace store would let labels set their own prices for songs, which they have complained that iTunes does not let them do. And all of the major labels have put their catalogs into Snocap’s database, which uses an audio fingerprinting technology to prevent people from selling songs they do not own.
The MySpace store will sell music in the MP3 format, however, which allows them to be played on the Apple iPod but does not offer any copy protection. So far, the labels have been unwilling to sell music online in any format that does not allow them to restrict how many copies can be made.
At least one of the major labels, EMI, is in talks with MySpace, according to one person with knowledge of the negotiations who declined to be identified, citing the confidentiality of the discussions.
Chris DeWolfe, co-founder and chief executive of MySpace, said: “We’re hopeful that once we start getting adoption from smaller bands and labels, the major labels will want to participate. We’ll be talking to them continually, as will Snocap.”
Others are more skeptical.
“The majors aren’t going to distribute music unprotected on MP3,” said David Card, a senior analyst at Jupiter Research. Without their participation, he suggested, the appeal of such a store could be limited. Snocap has the ability to sell songs in other formats, but Apple has never let other companies sell iTunes files, and right now other restricted formats have little traction with consumers.
There is one other large online music store that sells songs in the MP3 format, eMusic. It offers a wide range of material from independent labels, but nothing from the four majors. As of July, it had almost 13 percent of the market for online music.
Snocap’s system can be used by anyone, which would let small labels and unsigned bands sell their music just as major labels do. Currently, iTunes sells music from most sizable independent labels, but many smaller ones go first through a digital distributor.
“It’s not that easy, if you’re an artist on the street, to get your music on iTunes,” Mr. DeWolfe said. “With Snocap you can upload your music, sign the contract and do everything online.”
For each track it sells, MySpace will charge a band or label a fixed fee of around 45 cents, which it will share with Snocap, according to Snocap’s chief executive, Rusty Rueff.
The iTunes store keeps about 35 cents from each purchase, according to Mr. Card, because Apple is willing to accept low profits from selling music to generate demand for the profitable iPod. MySpace, which currently brings in most of its revenue through advertising, views music sales as another source of profit. Its music store will accept PayPal, rather than credit cards, because the transaction fees are lower.
Potential customers will be able to buy music directly from the pages that bands have set up. “That’s consistent with MySpace’s mission to build a direct relationship with the audience,” said Luke Wood, a talent development executive at Interscope Records, which has a distribution deal with MySpace Records, a music label started by the site. MySpace will also let users link to a band’s storefront from their personal pages to recommend their favorite acts, which could drive consumers to buy music they might not otherwise.
With sites like MySpace becoming an important venue for music promotion, the labels may need to weigh risk of online piracy against the potential reach of a MySpace store.
“I think that kind of distributed retail could be really significant as a model,” said Eric Garland, chief executive of BigChampagne, an online media measurement firm. “More and more, we’re exposed to media by other people. If I learn about music from you, I should be buying it from you. I shouldn’t have to scribble it down in a note for when I go to Tower Records.”
