MySpace Unveils Ad-Supported Music Venture with Major Labels

MySpace has become an online hub for millions of musical acts, from signed singer songwriters to punk rock band playing in the basement down the street. Now it hopes to cash in by creating a standalone MySpace Music entity and partnering with major labels Sony BMG Music Entertainment, Universal Music Group, and Warner Music Group.

The result will be a more robust version of the MySpace Music that exists today, with ad-supported audio and video and enhanced sponsorship opportunities for advertisers. New features will include e-commerce functions for portable music and related merchandise, as well as more integration with the site’s social features.

MySpace will share ad and sponsorship revenue with the labels, along with a portion of merchandise, mobile content, songs and ticket sales conducted on its platform. Users will be able to stream music, create and share playlists and download tunes, some of which will be DRM-free. Pricing for downloads of songs or other content was not revealed, but the firm aims to make costs “very competitive.”

During a conference call this morning, MySpace executives touted the firm’s ad HyperTargeting platform, indicating the system could be applied to create music-related audience segments for targeting display ads. The company also highlighted sponsorship offerings in the music arena, alluding to a live streamed concert last August with My Chemical Romance and Linkin Park sponsored by State Farm Insurance. In the past, MySpace has been home to a slew of exclusive album releases from the likes of Neil Diamond, Iggy Pop and The Stooges and JayZ, in addition to other promotions aimed at super-fans.

Components of MySpace Music will be released over the next three to four months. Execs said a Los Angeles-based management team will be hired to run production, marketing, technology and sales for the separate business.

As the music industry grapples with the reality of plummeting record sales, some see the deals with the majors as a sign of things to come. “We believe that one of the greatest growth opportunities for our industry is to develop new partnerships and models focused on unlocking the value of music in the online community space,” said Warner Music Group Chairman and CEO Edgar Bronfman, Jr. in a statement. “This venture may provide a defining blueprint for this next important stage in the evolution of social media, benefiting consumers, artists and music companies alike.”

MySpace execs said they hope more labels, including EMI, will get on board. Yet it remains unclear what the new entity will mean for independent labels, or for the countless unsigned bands and musicians making up the 5 million or so artists MySpace claims are on the site now. While major labels have used the Web venue as just another marketing tool, some smaller labels and acts use the site almost exclusively to communicate with fans, promote gigs and distribute new tunes.

The indie spirit generated by these sorts of organic interactions helped foster MySpace, but that spirit could be tempered by the now official presence of large corporate labels, especially if the new offerings are not accessible to smaller labels or individual artists. Some smaller labels are taking a wait-and-see attitude towards the new venture, hoping MySpace will recognize the impact they could have if invited to the revenue-stream party.

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