MySpace Music and the benefits of competition

As has been widely reported, MySpace and three of the four major music companies—Universal Music, Sony BMG, and Warner Music Group (EMI’s spam filter must have eaten the invitation)—sat down over a cup of coffee and plate of Danish to plot the demise of the iTunes Store. Oh, and possibly to also slow that swirling motion that’s sucking the music business down the drain. The idea goes a little something like this:

MySpace will take its existing MySpace Music service and launch it as an independent entity in a joint partnership with at least three of the Big Four music labels—rumors are that EMI will eventually join the party. The labels get a percentage of profits generated by music sales, ringtones, music-related trinkets and outer-wear, concert tickets, and—perhaps most importantly—ad revenue. In return they cough up their entire music catalogs. The contents of said music catalogs will not only be available for purchase (free of DRM, yet, so purchased tracks will play on iPods) but can also be streamed for free(ish)—meaning that streamed music will be accompanied by ads. Additionally, visitors to the site will be able to share the playlists they create with their pals. Oh, and there’s talk of a subscription-based component that would allow unlimited music downloads.

My guess is that at this moment, those holding the keys to the iTunes Store have expelled a concerned “Huh” or two. And rightly so.

With music sales plummeting due, in part, to piracy, the music labels turned to anybody that appeared to have their stuff together in regard to digital music sales. That body was Apple and its unborn iTunes Store. As the iPod and Store became more popular, Apple was in a position to dictate terms—such as refusing to budge on its 99-cent-per-single pricing policy. The music labels, after years of screwing artists and the occasional customer, were uncomfortable being on what they perceived to be the receiving end of such treatment. Since that “Hey, wait a minute…” moment, they’ve been looking for a way out.

Subscription services such as Yahoo Music and Rhapsody haven’t been it. Nor have online emporiums such as those launched and then folded by such behemoths as Virgin and Sony. AmazonMP3, which sells DRM-free tracks from the majors at prices often less than the iTunes Store, has been an interesting alternative, but shopping there is like trying to buy music at Best Buy or Wal-Mart. In all this massive floor-space, there is row-upon-row of music, but where?

Nope, iTunes still has the buzz, iTunes has the catalog, iTunes has the convenience, and iTunes has other attractive elements such as roomfuls of podcasts and TV shows that tempt customers for reasons other than music. And the music labels hate it.

They hate it not simply because Apple calls the tune but also because, in a way, they’re stuck with the same business model that put them where they are today. If the music is good and people buy it, you’re golden. If you’ve got a mediocre set of releases and customers stay away in droves (or your catalog is great but potential customers choose to steal it instead) you’re pig-iron.

The labels are now in a position where they’re unwilling to live hand-to-mouth, hoping for a few mega-selling albums to keep them in single-malt and limos. Given how things have gone, a steady paycheck, this year’s Lexus, and three fingers of Dewars would be adequate, thank you very much.

And MySpace Music has the potential to offer just that. When the catalog is the asset rather than good or bad singles and albums, when ads and subscriptions bring home the predictable bacon, when you can sell not just music but also its accompanying trappings, when you have a built-in customer base that understands the value in sharing music with their friends (and thus does a measure of marketing for you), when you work with a partner who is just as eager to displace iTunes as you are (and thus more amenable to your demands), when all this is offered in one convenient location… well, you’ve got something.

Provided you don’t screw it up. Which MySpace and the labels have done a time or two.

My hope is that they don’t. And for this reason: When AmazonMP3 appeared Apple reacted by lowering the price on its iTunes Plus tracks and stripping DRM from a greater number of tracks (including a boatload of albums and singles from independent artists). It’s possible that it would have anyway, but one can’t help but think Amazon’s appearance gave it a helpful nudge. I’m hopeful that a moderately successful MySpace Music encourages Apple to create an iTunes Store designed to blow its competitor away.

And if it doesn’t? Apple isn’t my religion. Give me a better product and I’m more than happy to take my business elsewhere.

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