MySpace preps download store

By Jim Welte - MP3.com

Social networking giant hopes its massive user base will pony up for MP3 downloads powered by original Napster creator Shawn Fanning's Snocap.

The trunk of the car, which has famously served as the do-it-yourself retail store for acts like Wu-Tang Clan and Clap Your Hands Say Yeah--is about to get a lot more shelf space.

The Format's download store on MySpace.

In a move tipped last month by Nettwerk Music Group CEO Terry McBride, MySpace is set to allow bands to sell digital downloads to its more than 106 million users, hoping to turn its social networking clout into yet another rival for Apple's vaunted iTunes Music Store.

"The goal is to be one of the biggest digital music stores out there," MySpace cofounder Chris DeWolfe told Reuters. "Everyone we've spoken to definitely wants an alternative to iTunes and the iPod. MySpace could be that alternative."

The tentatively dubbed MyStore began previewing on MySpace last month with Nettwerk rock band the Format, which has been selling MP3 downloads of its music for 79 cents per song.

Under the expanded partnership between MySpace and Snocap, indie and unsigned artists with MySpace pages will be able to use Snocap's Linx service and sell music directly to their fans. Bands themselves will have the ability to set the price for their music, with MySpace and Snocap reportedly splitting the processing fee of about 45 cents per track.

Bands already use MySpace to stream music on their pages, often allowing fans to preview unreleased music. For their MyStore, bands will upload their songs to Snocap's online music database so the company can make sure the band isn't seeking to sell music for which someone else has a copyright. Once added to their MySpace pages, friends of the band are then able to place the online music storefront on their pages.

But unlike every major digital download store except eMusic, the second most popular digital store behind iTunes, MySpace and Snocap haven't yet brokered deals with the four major labels to allow their bands to sell music on MySpace. Fans of the likes of Justin Timberlake and the Killers will have to wait until such deals are in place.

But with record labels showing signs that they are willing to try anything to find additional revenue streams and dilute the stranglehold that the iTunes/iPod combo has on the digital music business, those talks are reportedly under way. Citing a source close to negotiations, Reuters reported yesterday that EMI and MySpace are discussing a deal that would allow EMI artists, including Coldplay and the Gorillaz, to sell music straight from the artists' MySpace pages.

The majors and MySpace would need to agree on song format, however. For indie artists and unsigned bands, MyStore will sell songs in the MP3 format, without the digital rights management (DRM) technology that major labels have insisted on using in selling digital downloads. DRM applies usage restrictions to downloaded music, such as how many times a song can be transferred to an MP3 player or burned onto a CD.

In his blog, Jupiter Research analyst David Card noted that MySpace will need to get major label content on its artist pages to make MyStore a viable entity.

"No company in the entertainment business can make a lot of money off of supporting only the [long] tail, without also delivering the hits," he wrote. "And for now, no rock stars or major labels are going to be interested in unprotected MP3s, which is what MySpace will offer, except for promotional purposes."

That means MySpace and Snocap still have their work cut out for them to make MyStore fly. But Snocap isn't putting all its Linx in one basket, so to speak. The company is also hoping to power download service on other social networking sites, a stark expansion of the company's initial strategy of powering P2P services hoping to go legit. Linx hopes to make everyone a music retailer.

"In 18 months the biggest music retailer in North America and maybe the world will be the consumer," McBride said. "P2P is going to arrive in a way that nobody saw. Fans will be selling to each other and getting micropayments into their Paypal account."