MySpace is launching a new music service called MySpace Music in partnership with the major music labels. MySpace Music will allow users to stream full songs and create playlists for free, supported by advertising. It aims to compete with iTunes and recapture lost music industry revenue. Music labels hope it can weaken Apple's dominance in digital music and generate profits through advertising, downloads, and artist services. MySpace Music is set to launch by the end of September with millions of songs available.

1. September 16, 2008
A Jukebox on MySpace That Takes Aim
at Apple
By BRAD STONE
Just a few years ago, a Web site offering virtually every notable song ever recorded for free listening
would have had music business executives speed-dialing their lawyers.
In the next two weeks, a battered music industry, facing slumping CD sales and a bleak future, will
help to introduce just such a service, called MySpace Music.
The new site is the product of a joint venture among MySpace, the social network owned by the
News Corporation, and the major music companies — the Warner Music Group; Sony BMG, a joint
venture of Sony and Bertelsmann; and the Universal Music Group, a subsidiary of Vivendi. The
venture plans to make money from selling advertising on the site and from selling digital downloads
of music through a partnership with Amazon.com.
EMI, the fourth major label and the smallest, was not a participant when plans for the company
were announced in April. But people familiar with the continuing talks between EMI, a British
company, and MySpace say the label will probably join by the time the site starts, in exchange for a
small equity stake in the venture.
MySpace Music, which will replace an existing area of MySpace at music.myspace.com, represents
an effort to give music lovers the kind of comprehensive online jukebox they could once only dream
of. But it is also an effort to solve some of the more pressing problems of the music business.
Music companies hope the service, which weaves music through the increasingly popular world of
online social networking, will weaken Apple’s dominant grip on the digital music business while
helping to recoup revenue lost in the last few years as CD sales have suffered annual declines of 10
to 20 percent.
Greg Scholl, chief executive of the Orchard, the largest distributor of digital music from independent
labels, says a music business based on advertising “could well dwarf today’s $30 billion global
recorded music industry.”
Mr. Scholl’s endorsement is something of a coup for the service. He questioned the effort in a public
e-mail message to independent labels when it was first announced. But the Orchard is now set to

2. make its catalog of more than a million songs available to the site.
After learning more about the venture, Mr. Scholl said, he decided that MySpace would compensate
artists fairly and that free ad-supported music represented the industry’s only practical future.
“MySpace Music represents the first credible, large-scale initiative in this direction,” he said.
When it is introduced, most likely by the end of the month, the service will have several million
songs, all ready for instantaneous streaming. Users will be able to assemble private playlists of
hundreds of songs, which they can string together to perk up a party or ease the monotony of their
workday. They will also be able to post one of those playlists, with 10 songs, to their public MySpace
profiles, where their friends can listen and save those songs to their own pages.
To transfer the music to another computer or a mobile device like an iPod, visitors will have to buy
songs on the site through Amazon.com’s digital music store. Cellphone ring tones will be for sale
through Jamster, another unit of the News Corporation.
Around five million artists use MySpace to interact with fans, and MySpace Music will change life
for them as well. Now, those artists can post up to six songs on their pages. In the revamped site,
they will be able to post their entire catalogs and share in the resulting advertising and download
revenue. Sony Pictures, McDonald’s, State Farm and Toyota Motor will be among the first sponsors
of the site.
“What we are really doing is creating an economy for all musical artists,” said Chris DeWolfe,
MySpace’s chief executive.
Free online music streaming is not exactly new to the Web. Imeem, a four-year-old San Francisco
start-up company, and Last.fm, owned by CBS Interactive, offer services with much of the same
music from major labels and independent artists.
Dalton Caldwell, chief executive of Imeem, said that MySpace has struggled in the past to create
services that can take on established leaders. The MySpaceTV site, for example, has failed to
dethrone YouTube in online video. Even with its enormous traffic, he said, “they haven’t
successfully created homegrown services that can beat competitive threats.”
But executives at the major labels say MySpace Music offers a larger stage and bigger financial
opportunity than many existing music sites. Despite recent incursions by Facebook, which now has
more members worldwide, MySpace still has 120 million users around the globe and a larger
audience than Facebook in the United States, many of whom already use the site to discover and
share new music.
The path to MySpace Music has been a painful one for the music industry. Five years ago, various
labels and industry groups sued MP3.com, an early service that permitted people to stream any song
free as long as they could demonstrate that they had a copy of the CD. MP3.com lost the lawsuit and
closed its service.
But the music industry’s victory was pyrrhic. CD sales have plunged since then, and Apple has come
to rule the world of digital music with its iTunes store and the iPod. And activity on file-sharing
services continues to thrive.
“To the average consumer, music is already free,” said Rich Greenfield, an analyst at Pali Research.

3. MySpace Music, he said, “is the labels now acquiescing to that fact.”
They are also trying to profit from it. People familiar with the arrangement between the News
Corporation and the studios say that the labels own about a 40 percent stake in the new venture,
with Universal Music, the largest label, owning the biggest share. That would give the music
companies a direct interest in MySpace Music’s success. People briefed on the deals say they have
given MySpace favorable terms — and waived the penny-a-play fee that is charged to other
streaming music sites. MySpace would not comment on terms of the deals with the record labels.
MySpace says it eventually will let artists sell merchandise and concert tickets from their pages and
keep a share in the profit. Over the longer term, label executives say, they will add exclusive content
like new songs and videos to MySpace Music and offer deals to encourage customers to download
albums and collections of music.
“This is something we should have done earlier,” said Rio Caraeff, executive vice president for the
digital division at the Universal Music Group. “It’s kind of like a staging ground for us to experiment
with new business models.”
There is one more hurdle the new venture must clear: finding a chief executive. Mr. DeWolfe and
Amit Kapur, MySpace’s chief operating officer, have run the joint venture until now, but they are
now searching for a chief executive. Mr. DeWolfe says the new company will have 70 employees and
will soon move to separate offices near the MySpace headquarters in Beverly Hills, Calif.