MySpace throws its hat into the music ring

Offering music downloads is becoming an increasingly crowded market. The latest heavyweight entry is News Corp's MySpace social networking site, which says it will start offering a service later this year. Reuters reported MySpace has signed up three of the world's biggest music distributors - Universal Music, Sony BMG and Warner Music - in exchange for minority stakes in the MySpace Music venture. MySpace is thought to be in talks with the fourth, EMI.

MySpace is credited with more than 110m users. Although music is a key element of its appeal, so far record companies have only dabbled with social networking's potential, in the main using such web sites to promote artists and new tracks and running expensive law suits against them for perceived copyright breaches.

Chris DeWolfe, MySpace co-founder, openly said that the initiative will be a direct challenge to Apple's iTunes store, which currently accounts for around 75% of the entire music download market. MySpace intends to make inroads through abandoning digital rights management restrictions, such as only being allowed to play a downloaded track on one device, which irritates many iTune users. MySpace says its downloads will play on any device, including an iPod.

In addition, MySpace wants to have a range of pricing options, from free track streaming to advert-funded tracks.

Forrester Research analyst James McQuivey said in the Reuters report that MySpace Music was the right step for music companies, but noted, 'Apple will not be affected for the first few years because Apple's iTunes store lives on the strength of Apple's devices.'

No doubt the record labels will be pleased to see iTunes have some real competition at last, which they hope will loosen its stranglehold and ability to dictate terms.

It is thought that against MySpace has had to pay Universal something in the region of US$100 million (€63.8 million) to settle a copyright law suit that has been running since 2006  to secure its support for the MySpace Music venture. Honour satisfied, the two appear to have recognised that cooperation makes far more commercial sense.

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