Amazon To Power Upcoming MySpace Music Downloads

The as-yet unlaunched MySpace Music will likely partner with Amazon to handle all music ecommerce transactions, we’ve heard from multiple sources. Apple and Rhapsody are also bidding for the business, however, and one source says a final decision hasn’t yet been made.

The project, which combines the music from three of the four major labels (Sony BMG, Universal Music Group and Warner Music Group) with $120 million in cash from MySpace along with MySpace’s existing music properties, is set to launch in September.

Music download sales are just one revenue stream for the property. In addition to sales of DRM-free music (singles, albums, playlists), MySpace Music will likely also offer ring tones, concert tickets, merchandise (tshirts, etc.) and branded advertising campaigns.

But downloads are going to be a big part of total revenue, and while margins on music sales are low, the volume could be massive as MySpace directs its traffic to the new site. The big three music providers are likely the only partners who can handle that kind of flow. And Amazon and Rhapsody need market share to effectively compete with market leader Apple/iTunes.

Another factor in bidding is likely the ability of the partner to easily handle signed, independent and unsigned artists. MySpace has 5 million bands with a presence on the site, so the long tail is a factor.