An Embarrassed Warner Music Regrets MySpace Music Deal

One thing is for certain – the six month old MySpace Music project is throwing off a lot of cash to the labels. That’s because MySpace’s 75 million or so U.S. users are streaming literally billions of songs a month. And they have to pay for every song streamed.

Labels are known to give streaming rates for on demand music of around half a cent per song play, but they are negotiated on a deal by deal and label by label basis. Journalists have tried repeatedly to understand the rates that MySpace is paying since the volume means lots of dollars are at stake. MySpace has always guarded this information closely, since it’s a competitively valuable piece of information. But there’s another reason they may be so secretive – the deals they cut with the four big labels may all be very different. And the deal they cut with at least one label, Warner Music, may not have streaming rates at all.

Our sources say Warner has been complaining about the deal they did with MySpace. That deal has no per song streaming cost, but includes a revenue share on advertising displayed when the song is played. That revenue share hasn’t been what they thought it would be. And the staggering number of plays of songs from their catalog, combined with their newly acquired knowledge that their competitors are being paid per stream, has left them steaming mad.

Warner will get little sympathy from, well, anyone. But they’re telling people that they plan to make changes when their deal comes up for renewal, or pull their music from the service. But the fact that their revenue share is significantly less than they thought it would be means MySpace Music may not be monetizing as well as they had hoped. That means the whole ecosystem may be in danger. If MySpace is facing tens of millions of dollars in losses every year (or more) from royalty payments, it’s only a matter of time before they’ll give up.

Already the service does things to limit streaming and associated costs, like only playing four songs on a playlist before asking if you are still there. That leaves the door open for services that have different business models and allow for the user experience to come first. See LaLa and the still fantasy-land MOG music service that look promising.

MySpace Music refused to comment on this post.