MySpace Music Nears the Starting Block

MySpaceís long awaited Music Service looks set to be announced later this week or early next. Though details are unsurprisingly patchy at this stage it looks set to include ad supported streaming and MP3 downloads. Reports indicate that Universal, Sony BMG and Warner are on board or on the verge of being, with EMI yet to sign on the dotted line. The labels will take an equity stake in the new service.

Of course this service should have been live long, long ago. MySpace has established itself as a crucial element of the music marketing process in a ridiculously short period of time, and music is also a key driver of its audience. Jupiterís research shows that nearly a third of European social networkers buy music they discover on MySpace and Bebo, rising to close to a half in the UK. If that is the conversion ratio when a purchase is a minimum of a URL and numerous clicks away, the potential of an integrated offering is undoubtedly significant.

Iíve heard from a few contacts in the labels that MySpace has been overplaying its hands in negotiations, essentially implying that it is doing the labels a favour and should be rewarded for it. Be it as it may that a symbiotic relationship of sorts exists, this is still the labelsí content and they still need revenue. Acquiring equity in the store hits something of a compromise. But it also represents the era of transformation the music industry is entering. CD sales may be declining and digital revenues may be modest, but consumption is at least as strong as it has ever been. What the record labels need to do is create a revenue generating framework around consumption and understand that purchasing will be much less central to future revenues than it has been historically. Expect many more innovative services and mould-breaking partnerships as the labels throw everything at the wall to see what sticks.