MySpace takes aim at iTunes

Thu, Sep 25, 2008

Analysis, News

Today MySpace is launching a new online music service that it hopes can chip away at iTunes’ dominance in the music retail market. The new initiative from MySpace has the backing of all four of the major music labels. MySpace users, which number over 120 million worldwide, have previously been able to go to the MySpace page of their favorite artists and and stream a few pre-selected songs. The new service, however, will allow users to freely stream songs from a much larger catalog of music with the option to then purchase them from Amazon. Users will also be able to create playlists and share them with their online friends.

The Economics of MySpace Music

The site will be supported through advertisements, with big names like McDonalds and Toyota already on board. But will MySpace be able to make any money off of this venture? According to a few sources, the record companies will be charging MySpace 1 cent for each streamed song. So if a user streams 100 songs, MySpace will owe one dollar, and to make that money back, it will have to charge advertisers 1 dollar for every 100 page impressions (which is obviously 10 dollars for every 1000 page impressions). This is significant because it has been noted that MySpace, in the past, has only been able to charge advertisers 3 dollars for every 1000 page impression

What the ad supported media player looks like

What the ad supported media player looks like.

Moreover, MySpace was only able to entice the big four record companies (Sony BMG Music, Universal, Warner Music, and EMI) to sign on board after offering them each an equity stake in the project, along with a cut of the ad revenue that the site generates. Under such an agreement, it seems that there are too many pieces of the pie to be shared to allow any one party to make any significant amount of money through advertisements – but making money via ads might not actually be the primary goal for the companies involved.

The Apple Model

Keep in mind that Apple has sold over five billion songs through iTunes, yet it barely breaks even with the service. Rather, Apple makes money via the iTunes storewhen consumers purchase iPods to listen to their downloaded iTunes tracks. Similarly, its entirely possible that MySpace and the record labels have larger and more profitable objectives in mind as they prepare to launch the new site.

What MySpace is hoping for

MySpace would delight in anything that keeps users on the website for as long as possible. Even more appealing, yet further down the road, is the idea that MySpace will be able to parlay their new music service into other related streams of revenue such as t-shirt and concert ticket sales. MySpace might be banking on their new service evolving from a streaming music site into a one stop, full service music resource center for consumers.

What the record labels are hoping for

And as for the record labels, they really have nothing to lose and everything to gain with this partnership. They’re making money via ads, and also have an equity stake in the venture. Also, as CD sales continue to decline, old school record executives are desperately seeking new ways to counteract the fact that consumers are becoming more and more comfortable with purchasing their media online. The record companies are also eager to wrestle back some of the power they feel that they’ve lost to Apple and iTunes. If MySpace music takes off and becomes a big hit, it will give the record companies more leverage in future negotiations with Apple. It’s well known that the big record companies aren’t too happy with the fact that Apple refuses to charge more than .99 cents per song per download. They would prefer to see Apple charge higher prices for newer songs and CD’s than for old ones.

Will new features be enough?

Many a service has tried to dethrone iTunes only to suffer a quick and painful defeat. So while MySpace music obviously faces an uphill battle, it seems to be one of the most compelling challenges to iTunes to date. One of the most intriguing features of MySpace music is that it will give users the option to create playlists of up to 100 songs, and listen to them all for free. Typically, streaming music supported via ads does not allow users to pick exactly what song they can listen to, or will only make available a limited number of songs from each artist. This seems to be one of the more attractive features of MySpace music, and with other niceties such as the ability to share playlists with people who are already your online friends, and the ability to search for relevant ringtones, will MySpace music actually cause a dent in Apple’s armor? Take a look at the new MySpace music service here, and see for yourself if iTunes has finally met its match.


, , , ,

11 Comments For This Post

  1. PJ Says:

    The site is a definite upgrade, but they still don’t have full catalogs from a lot of artists. Hopefully this will improve as the site matures

  2. Ivan Says:

    myspace still has a long way to go, but if it’s not congested with a gazillion ads it may bring good exposure to up & coming musicians.

  3. ph0eniX Says:

    purchasing music?! what is this 1982? good luck!

  4. Sarah Says:

    Seriously, I can’t believe people actually think this is a good idea! They’re passing out a mediocre service that could be a lot better as the next best thing… there’s GOT to be a better solution out there – a solution that actually benefits musicians and not record companies.

    I am NOT willing to pay for a band’s marketing. I am, however, willing to pay for a band’s MUSIC. Little by little MySpace is becoming more and more all about advertising and promotion, leaving what they claim to be their true drive behind – music. And they expect us to believe they’re still in it for the music. Pathetic!!

  5. swanny Says:

    their music player jacked up many artists plays.

    my buddy had nearly a million plays. he has 26 now.

    booooooooooo myspace.

  6. Music SPY Says:

    It’s not really all that much an uphill battle, as Myspace is owned by Turner Media (same folks as Fox/Searchlight who have a bit of pull with Record labels considering they’re one of the major media holders with stakes in some of the biggest record labels).

    I’m sure they’ll pull it off, consider they can leverage their millions-strong userbase, most of whom are willing to buy music online. What makes this all the sweeter, is that you’re forgetting about record sales – they can easily put up a link to buy higher quality versions of the songs meaning they can make a huge commission off of sales – that could add up to a much larger chunk of change then what they would charge advertisers. They could even amp up the entire thing initially by charging less for songs then ITunes – so something like 80 cents per a song, and offering perks like coupons off of concerts or extra unreleased songs/video clips/interviews.

    It would definitely pull away a few customers from ITunes, I mean if you can get it cheaper people will definitely go for it.

  7. Trevor Says:

    In response to SARAH “there’s GOT to be a better solution out there – a solution that actually benefits musicians and not record companies.

    I am NOT willing to pay for a band’s marketing. I am, however, willing to pay for a band’s MUSIC. ”

    For those looking for an alternative to myspace that actually pays the MUSICIANS (they also support sales of film, video, photography) check out Aussie venture

  8. Fat Albert Says:

    I’m not sure if they’re still working on it, but I wasn’t impressed with the catalog of music they had up. Being able to stream 7 tracks from a CD of 14 songs won’t cut it. I’ll stick to Pandora in the meantime.

  9. Maria Says:

    Just another feature add to MySpace. I hope more features can be added to it in future.

  10. web design Says:

    My Space is launching a new service hoping to shake up the digital music scene.

  11. Cody Says:

    i wouldnt trust to pay myspace and get quality…

    the site is down often, and the newest music players on the sight are real shitty… always glitching…

    if anything facebook would be a better bet for the labels… the rising star that myspace is being forced to model after…

    but i love itunes… and i think that record companies need to accept their fate.

    The way music is sold today makes labels pointless, artist’s can sell their own music online and advertise themselves online for cheap/free…. so why bother with the middle man? that’s bad for everyone…

    i welcome the change. And, i love itunes… i don’t need a plastic disk and a bunch of packaging… think of the “green” value this has towards lowering polution… just one less thing to have laying on the ground…

    and it’s like 10 bux for a cd VS the 20 i used to pay…

eXTReMe Tracker