MySpace Music Puts The Industry On The Right Track

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I’ve spent the last few hours this morning using the new MySpace Music product – searching for music, adding it to playlists and my profile, and listening. It’s far from perfect (more on that below). But MySpace has done something incredible at a big picture level: they’ve created both a compelling music experience for users as well as a realistic, long term business model for labels and artists in a world where recorded music moves towards free.

The Music Experience

MySpace music combines free on-demand streaming music with buyable downloads from Amazon, ringtones and video and other content. Soon the service will offer artist merchandise (tshirts, etc.) and concert tickets.

Users can create public or private playlists and embed music onto their profile pages. A nice touch – 65% of MySpace users add songs to their profile, and MySpace aggregates every song you’ve added to your profile and makes an initial playlist out of it for you. Artist pages, which previously only had a few promotional tracks, now include entire catalogs of their music. Any song can be clicked and added to a playlist.

The user experience is an 8 out of 10. Even though EMI’s catalog hasn’t been fully uploaded yet, every song I searched for was available, even some obscure tracks. Search works extremely well, and adding tracks to playlists is intuitive. Depth of catalog and usability is far beyond what other free streaming services like Last.fm and iMeem currently offer. And when it comes to listening to music, the pop out player, pictured above, is excellent. I just wish the pop out player had the ability to search and add music to playlists on the fly.

MySpace Music also lets users see what their friends are adding to playlists in an activity-stream like list on the music dashboard (MySpace COO Amit Kapur, it tells me, just added Electric Feel by MGMT). With a click, I can add that song to any of my playlists, too.

Soon all this playlist data will let MySpace do even more with recommendations. You won’t just see top 100 lists across music categories. You’ll also see top songs from your friends, or from people like you, etc.

So why is the experience just an 8/10? For now only U.S. users can access the new music content. Everyone else has to wait for licensing deals to be negotiated.

And there’s lots of work to do on the product itself. There’s no way to share public playlists, for example. And unlike iMeem, MySpace Music doesn’t yet offer the ability to embed the music player into other sites. Also, my browser crashed repeatedly tonight while I was testing the service.

A Business Model

The big labels own around 40% of MySpace Music. MySpace owns the other 60%, and presumably new employees, like the pending CEO hire, will dilute everyone.

That 40% may be worth as much as $800 million already, on paper at least. So right off the bat labels are pretty happy.

Labels make more money every time a song is streamed. 20 billion or so song streams are initiated per month on MySpace today (many of them from auto-plays when profiles are loaded). That number is going to go way, way up. Streams are calculated based on complicated contracts that look at full plays and partial plays, so it’s nearly impossible to determine fees that will be paid to labels. But it’s certainly likely to be in the tens of millions of dollars annually, and possibly a lot more.

Labels also get a cut of ad revenue brought in to the joint venture, and when ringtones and downloads are sold they get a piece of that, too.

Some of this money may even make its way to the artists.

Indie labels are in a great position, too. They don’t have equity but they get paid for streams and downloads. And they have all the tools and promotion features that the big labels have. It appears to be an even playing field, and I’m already finding some great music from artists I’ve never heard of.

MySpace says that merchandise and ticket sales will go online soon as well, providing more opportunities for artist and label revenue.

The trojan horse here is that MySpace is making artist pages canonical. If you really like an artist, you can stream every song they’ve recorded for free from their MySpace page. And see their concert schedule. And buy tickets to those concerts. And a Tshirt. And see music videos and other video content. It’s going to be the place you go to get news about them and listen to their music.

It’s a great resource for users, and it’s likely to become the center of the revenue ecosystem for artists, particularly unsigned artists starting to make a name for themselves.

The Future Of Recorded Music Is Free, And MySpace Just Took Another Step In That Direction

Just a year and a half ago it wasn’t clear if the music industry would ever give up on DRM. People were calling me crazy for saying that the price of music must inevitably tend towards free because anyone can copy any song for free.

But today the labels have all but given up on DRM, and users can now play virtually any song ever recorded on demand for free. MySpace has created the first ecosystem that has a shot of producing sustainable revenue streams for artists based on advertising, merchandise and concert sales.

If it works, the next step is the fall of per-stream fees and download fees. Instead labels will see music consumption for what it really is – free marketing. Labels will compete to encourage song downloads and streams to move those songs up the charts, attracting premium advertisers, merchandise sales and sold out concerts.

A lot of positive press is rolling in around this launch, and it’s much deserved.

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