pampelmoose Dave Allen of Gang of Four’s Music and Media Blog

No Age on the Lamar Bridge at SXSW 08 ©Nilina Mason-Campbell

Things just got a little more confusing. One of Wired’s blogs covered the MySpace/major labels story [it might even turn out to be a non-story] - MySpace has partnered with three of the four major record labels in an effort to create “a one-stop source for all music, in all its various digital incarnations,” according to The New York Times. The new service will let users stream tracks for free, buy DRM-free downloads that can be transfered to portable devices, and maybe even sign up for an unlimited MySpace Music subscription service. The deal will require MySpace to spin off its music division. MySpace Music will become a separate entity, owned partially by the labels and operated by MySpace. In return for dropping a copyright infringement suit against MySpace, Universal will receive a settlement rumored to be in the $100 million range. The one remaining major-label holdout, EMI, is expected to join the service soon, according to The Times, which quoted sources close to the negotiations.

The questions then are “what do the major labels hope to gain? And is this a great service for music customers?” Another question would be “Do all of the unsigned bands and artists [including Gang of Four] get to share in any income from such a deal given that they have helped build MySpace.com by uploading their music to the site and attracting visitors?”

My answer to the first question would be that this move by the majors smacks of clutching at straws and also points to their paranoia over the iTunes stranglehold that they foolishly fell into. With iTunes having now become the number one music retailer in the USA it’s understandable that the majors would be concerned that they have dropped all their apples into one basket [pun intended.] And with Apple’s Steve Jobs being the shrewd and savvy marketer that he is, their fortunes are intrinsically linked to iTunes and whatever Jobs comes up with next in terms of remaking the music market.

This brings me to the second question - without a doubt music buyers love iTunes. MySpace as a music retailer might bring a younger demographic to the table but unfortunately young people are less inclined to purchase music. With iTunes, EMusic and Amazon’s download service each offering great customer experience online I would argue that there is not much room for another download/subscription/streaming service to enter into the mix.

Third question - How will all of the unsigned bands and artists benefit from this deal? If they are not included will they switch allegiance to FaceBook who would no doubt welcome them all with open arms? The folks at MySpace may be forgetting that it is the musicians and music fans and their social networking via MySpace that is driving the “business” of MySpace. James McQuivey, vice president and principal analyst at Forrester Research says - “A MySpace music store is exactly the right step to get the music industry to the next level because it recognizes that consumers don’t just buy music, they experience it, which is a much larger concept,” McQuivey said. “They share, they discover, they heckle, they even use it to provide self-identity.”

He is correct but monetizing that experience, that emotional connection, may prove way more difficult than everyone thinks. Look what happened to Snocap….who had a deal to sell music by artists on MySpace.