MySpace to Enable Users to Sell Songs

This is massive guys!
--

Excerpted from LA Times Report by Dawn Chmielewski & Charles Duhigg

MySpace.com plans to let its 77 million users sell music downloads, another move by corporate parent News Corp. to make the social networking site as profitable as it is popular.

Shawn Fanning, whose Napster software upended the music industry in 1999, will provide technology that enables musicians on MySpace to sell songs directly to fans — and even for fans to sell to one another.

When the tentatively dubbed MyStore launches this year, bands will be able to price and sell songs in the MP3 format, which works on Apple Computer’s popular iPod players as well as rival devices powered by Microsoft software.

Although the service is aimed at independent acts, MySpace is in talks with all four major music labels to possibly offer the works of big-name artists. As with many new forms of online distribution, the big labels are waiting to see how well the technology works before striking deals.

“This is a huge step,” said Terry McBride, chief executive of DCIA Member Nettwerk Music Group, one of Canada’s largest independent record labels. “Now, fans will be able to genuinely recommend music to their friends that people can buy.”

One of McBride’s acts, the Format, is among the first to offer 79-cent downloads on MySpace. The Arizona-based band lost its Warner Music Group deal last year after releasing a 2003 album, “Interventions and Lullabies,” but it has established a fan base on MySpace, where it posts tour dates and music videos.

Fanning’s company, Snocap, spent four years creating the technology that enables artists to register their music and collect payment no matter where on the Internet a person downloaded a song. It will also enable fans to sell their favorite bands’ tracks on their own MySpace pages, with a portion of the proceeds going to the artists.

San Francisco guitarist Shelley Doty, for instance, already uses Snocap’s technology on her website. The singer of “Don’t Miss This Ride” can set her own price and sell her music to fans.

“She can add tracks at will,” Snocap Chief Executive Rusty Rueff said. “She can change the price at will. The coolest thing is the instantaneous side, the immediacy of bringing together creation, and distribution like it’s never been done before.”

MySpace allows people to create personal web pages and then link to circles of “friends.” In addition to teenagers posting their photos or poetry, bands and movie producers create MySpace pages to promote their wares — frequently attracting tens of thousands of friends.

About 3 million acts — including U2 and teenage garage bands — have MySpace pages.

It was that massive audience that News Corp. sought to capture when it bought MySpace’s Los Angeles-based parent company last summer for $580 million. At the time, analysts questioned how News Corp. Chairman Rupert Murdoch would capitalize on MySpace’s traffic without alienating its mostly young users.

Since then, the News Corp. division overseeing MySpace, Fox Interactive Media, has bolstered the sometimes shaky technological foundations of the service. And it has gradually introduced money-making features that cater to the tastes of MySpace users. Last month, for instance, the company announced plans to sell downloadable copies of 20th Century Fox movies and TV shows on MySpace.

“The take on big corporate FOX coming in and heavy-handedly mistreating MySpace and ruining the community — obviously, that was anything but the truth,” said Michael Barrett, Executive Vice President and Chief Revenue Officer for Fox Interactive.

“We’re just beginning to see the start of a strategy that really tries to take full advantage of the community. The power of it.”

Some analysts doubted that News Corp. would make much money from MyStore initially. The company will split the processing fee of about 45 cents per track with Snocap. Even Apple’s iTunes Music Store is considered a modestly profitable software complement to the high-margin iPod.

“It’s really great for the bands and the fans on MySpace, but I’m very skeptical that anybody’s going to make a lot of money off this,” said Jupiter Research analyst David Card, who noted that no media companies make money exclusively by selling esoteric content to niche audiences. “I believe in a ‘long tail,’ but I have yet to find a media company make a living delivering only the long tail without delivering any of the hits.”

Longer term, though, some analysts said, MySpace could broaden the appeal of legitimate online music sales.

“This creates competition for iTunes,” said Ted Cohen, a former EMI executive who is managing partner of digital media consulting firm TAG Strategic. This, combined with the impending launch of Microsoft’s Zune media player, “could make the digital music marketplace more of a horse race.”