MySpace takes on iTunes – launches free “on-demand” music streaming site

Social network MySpace lobbed a shot across the bow of Apple iTunes last night with the launch of MySpace Music, a new site that offers free on-demand music streaming along with MP3 downloads for sale to U.S. users.

The joint EMI Music, Sony BMG Music, Universal Music Group and Warner Music Group venture, which MySpace announced in April, builds on the social network’s roots by including new user-to-user sharing tools and new ways for musicians to sell music and merchandise.

Many initial reviews lauded the MySpace Music user interface and its business model, which aims to generate revenue from advertising from large companies like McDonald’s, State Farm and Toyota, and through sales of merchandise and concert tickets.

Users can stream songs for free or purchase music downloads from a catalogue of five million artists through the site, which is powered by Amazon’s MP3 downloading service.

The first phase of the site includes a new “MyMusic” tool set to help users download, stream and personalize their music content and create public or private playlists.

Users can stream music from a friend’s playlist on demand. Users can also purchase DRM-free MP3s of any of those songs, MySpace said. “Buy” buttons on the site will allow users to purchase MP3s that are playable on all digital music devices, including iPods, MySpace said.

Michael Arrington, a blogger at TechCrunch, said that MySpace has done “something incredible” for the online music business.

“They’ve created both a compelling music experience for users as well as a realistic, long-term business model for labels and artists in a world where recorded music moves toward free,” he noted.

“Today, the labels have all but given up on [digital rights management], and users can now play virtually any song ever recorded on demand for free.

MySpace has created the first ecosystem that has a shot of producing sustainable revenue streams for artists based on advertising, merchandise and concert sales.”

If it works, he went on to note, the next step in the evolution of online music will be the decline of fees for per-stream feeds and downloads.

“Instead, labels will see music consumption for what it really is — free marketing,” he added. “Labels will compete to encourage song downloads and streams to move those songs up the charts, attracting premium advertisers, merchandise sales and sold-out concerts.”

Marshall Kirkpatrick, a blogger at Read Write Web, applauded the MySpace Music interface with its drag-and-drop playlist creation, dynamic re-populating players and a pop-up player that plays music when a user leaves a page.

“Apparently, the point is that MySpace is a huge, full-service stop where people are already gathering,” he went on to note. “We buy that, and we think MySpace Music will be a strong player. We’ve written about what the perfect streaming music service might look like — we wonder how close this will come.”

David Chartier went on to note on ArsTechnica that since MySpace was founded in part to allow musicians to get their songs in front of an audience that MySpace Music seems like a natural evolution for the social network.

“It’s no secret that, while digital music sales have been steadily rising, CD sales have slumped,” he added. “But amidst a growing number of digital outlets with varying business models, MySpace already has a massive U.S. user base of around 80 million users, all who now have unfettered access to a large catalog and the six degrees of product marketing that comes with it.”

MySpace.com’s deal to join with three of the world’s four largest music companies to create a joint service was prompted mostly by demands from many of the social network’s 110 million users for the ability to download and buy music, concert tickets and other items, said Amit Kapur, MySpace’s chief operating officer.

Announced today, the new MySpace Music service pairs the social network with Sony BMG Music Entertainment, Universal Music Group and Warner Music Group, which are providing their entire music catalogs. Kapur declined to comment on why EMI Music, the fourth major record company, was not part of the announcement.

Financial terms of the deal were not disclosed.

The joint venture — which marks MySpace’s first foray into selling products — expands the social network’s existing music platform to provide users with DRM-free digital music downloads, ad-supported audio and video streaming, a mobile phone storefront and a concert ticket sales office.

While Kapur didn’t comment directly when asked if the deal signals that music labels are giving up their own services to instead align with distributors that resonate with buyers, he did say that people are experiencing music in a much more social way.

“They want their music and content online in an environment that is personal, portable and collaborative,” he said. “That is what you get on MySpace. I can find the music that I want and share it with my friends. When I find a new song that I like, there is disconnect between listening to that song and purchasing it. [Users were saying] why can’t I download a song or buy a concert ticket from your site. That was the inspiration.”

The goal of the new venture is to build on the existing traffic and popularity of MySpace’s existing music platform, which the company said now attracts 30 million unique visitors a month to hear music of 5 million artists.

The service will integrate new content across the MySpace Music home page, the site’s artist profile pages and individual MySpace user home pages to provide multiple opportunities to discover, share and purchase music for any device, the companies said.

“With these three leading companies, we are going to take what has been a rich and vibrant community on MySpace Music to the next level,” Kapur said. “We want our music platform to be frictionless — discovery, consumption and sharing of music will exist in one environment.”

The new service lets users control their MySpace Music from their own home page by using enhanced search tools to create playlists and purchase music, MySpace said. At the same time, musicians can use the service to sell digital downloads, mobile ring tones and artist wallpapers directly from their artist profiles.

The new services will begin rolling out over the next few months, Kapur said.

The new service will be based in Los Angeles and will be run by a dedicated executive team.

Adam Ostrow, a blogger at Mashable, speculated that the service could be a huge revenue source for MySpace because its biggest strength today is its music section and artist pages.

“If you are to believe Google — which blames recent lackluster earnings in part on weakness in advertising on social networks — this is a needed move for MySpace to start realizing the revenue potential of its tens of millions of eyeballs,” Ostrow added.

“MySpace’s chief rival — Facebook— seems to be content with getting their slice of the digital music pie by linking users to iTunes via artist pages for the time being,” he added. “This also comes at a time when artists are increasingly launching their own social networks to cut out the middlemen.”

James McQuivey, an analyst at Forrester Research Inc. in Cambridge, Mass., said that the MySpace music store recognizes that consumers don’t just buy music, they experience it.

“They share, they discover, they heckle [and] they even use it to provide a self-identity,” he noted in an e-mail. “If MySpace and the music labels do it right, consumers will be able to touch on every aspect of their music experience in one place, including buying tickets for concerts — and I expect in the future, watching concerts on MySpace.”

McQuivey, predicted that Apple — now the most popular online music retailer — will not be affected initially because its iTunes store lives on the strength of Apple devices.

“One implication of this is that Apple may decide to improve its store experience, but I don’t see it trying to compete as a social network,” he noted. “Instead, it will do what it does best — making expensive devices people love.”

Both Apple and MySpace have a growing advantage over the major music labels, he added, because music is evolving to become a fluid experience that consumers can add to the device site that matters most to them.

“That’s when the brand behind the experience becomes paramount, even more important than the device or the service,” McQuivey noted.

“That’s where the music battle is headed in the next decade, and that’s where Apple and MySpace will both have an advantage over the music labels.”

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