MySpace unveils new music service

Executives from MySpace officially announced the creation of MySpace Music, a service that will be jointly operated by News Corp.'s MySpace and, at least initially, three out of the four top record labels.

The Thursday morning (US time) teleconference MySpace held with the press was anticlimactic since details about the service have been leaking for weeks.

The service will roll out gradually over the next three to four months and offer free streaming music, unprotected MP3 downloads, ringtones, and e-commerce offerings such as merchandise and ticket sales, said MySpace CEO Chris DeWolfe. The goal is to make MySpace a one-stop shop for everything music. Among the top four music companies, EMI was the lone holdout. A source with knowledge of the negotiations said that MySpace and EMI continue to seek a deal.

(For more on what lies ahead for EMI, read what the incoming chief of its digital unit, Douglas Merrill, had to say in this interview from Thursday: "Will former Google exec help save the music industry?")

The partnership with MySpace is another sign that the music industry has decided to embrace the Web and digital technology instead of waging war against it. As CD sales continue to shrink and piracy expands, the labels are moving toward the inevitable: a redefining of how they make money from music. With MySpace Music, the labels will get an equity stake in the new joint venture and a share of all the revenues the service collects.

To this point, none of the challengers to Apple's iTunes has been able to gather an audience of any relevance or able to cut licensing deals that would provide them with a music offering that equals or surpasses Apple's.

That changed today.

MySpace has 110 million users, 30 million who listen to music on the site. Combine those numbers with the 5 million music acts that promote themselves on the site and MySpace already has impressive music credentials. James McQuivey, an analyst with Forrester Research, said MySpace could help modernise the music industry.

"MySpace has the audience and environment to enable the music industry to get to the next digital level," McQuivey said. "What iTunes offers is a good buying experience but that's not all people do with music. They they talk about it, they share it, they try things out. Remember, this is the kind of activity that (record label) Universal Music Group was suing MySpace for previously."

McQuivey continued: "I think the labels said to themselves,'Oh, if we enable fans to have a fully immersive experience, they might spend more on music. MySpace can offer a place where all aspects of the music experience can be expressed. Imeem was getting close to this but MySpace, if they don't mess it up, should take the music industry to Music 2.0"

Thomas Hesse, president of global digital business at Sony BMG Music Entertainment agreed that part of what attracted the record companies to MySpace was its audience.

"MySpace is already one of the largest music communities on the Internet," Hesse said during an interview with CNET.com.au sister site CNET News.com "We're aligning our efforts to reach fans through every conceivable platform."

DeWolfe did not disclose what prices might be, nor would he disclose information about the status of a copyright-infringement suit brought MySpace by Universal Music last year. A source said that the suit was settled for a large sum.

Although DeWolfe declined to discuss financial terms of the deal, the source said that it is non exclusive, meaning that the labels are free to make similar arrangements if they choose. Facebook has been reportedly talking to the labels about launching its own music service.