Record Labels Forge New Business Blueprint with MySpace

Posted by chound on 03/18/2009

By Bobby Reed
For decades, record labels have competed fiercely. Each has fought not only for the consumer's dollar but also to make sure its roster of acts gets played on the radio, does brisk business on tour and wins trophies at awards shows. If one label's success came at the expense of another's, well, that was the nature of the game.
But circumstances have changed the lay of this land, and labels often work together now to find reliable, innovative methods for generating revenue from the consumer's online listening experience. A new deal with MySpace Music sets the tone for one such collaboration. This endeavor promises to improve the formerly fundamentally adversarial relationships between some content providers and, one of the Web's leading social networking sites.

In September 2008, MySpace Music began a joint venture that involves EMI Group, Sony Music Entertainment, Sony/ATV Music Publishing, Universal Music Group and Warner Music Group, with an aim to grant music fans legal access to a virtual jukebox of millions of complete tracks. In return, the labels get revenue share and/or company equity. MySpace Music features advertising-supported free streaming of full songs and the sale of music that is free of digital rights management (DRM) via's downloading service.

If successful, this arrangement could encourage similar partnerships. Chris DeWolfe, CEO, MySpace, told The Associated Press that the site complements Apple's iTunes store and that MySpace Music could "create an ecosystem for both music artists and the labels to make more money."

One intriguing aspect of the MySpace Music arrangement is that in addition to ad and sales revenue, the major labels will receive underlying revenue pulled in by MySpace Music. This means that each major label will reap financial benefits from the sale of music from all labels. (Independent labels, though also involved, are not part of this venture as equity partners.) This could represent a promising new way of cooperation among competitors in the name of mutual self-interests.

"For years, we have tried to agree on standards, whether it was stereo sound or the format of the packaging," said Joe Galante, Chairman, Sony Music Nashville. "You could put 10 of us label executives in a room and you'd get 10 different opinions. It's never been particularly cooperative. But with the environment we're in now, everybody realizes it's better for us to be in this than for each of us to try to do it on our own. MySpace has proven that they understand the consumer. MySpace allows consumers to collect and share music. Labels have never really been good at that. We're great discoverers, developers and marketers of talent, but we haven't been great about that collecting process."

With thousands of Country acts now hosting pages within the MySpace community, teaming with MySpace Music can help the music industry regain some of the revenue stream that has been lost due to the persistent problems of piracy and the unauthorized use of copyrighted material.
"The lesson that everybody in this business needs to learn is that content is not free," Galante said, emphatically. "As a content provider, if we're going to invest in, market and develop artists and content, then we need to be paid for it. It may not be the same model we've used in the past, but the people who use this content - and build their businesses with it - cannot do it in the name of promotion anymore. We want more people to acknowledge the fact that when you provide the content, there should be some payback."

One of the most common examples of unauthorized use occurs when someone uploads a copyright-protected video snippet, such as a scene from a TV show, to a Web site. Such clips often contain copyrighted music. With 35 million monthly unique users on MySpace, it would be an arduous task to catch every example of unauthorized use.

To address this issue, MySpace has entered into a partnership involving MTV Networks and the online video ad technology company Auditude. Rather than remove those copyrighted clips that originated on MTV Networks, MySpace will place ads on them. Revenue generated from these ads will be divided among MySpace, Auditude and the copyright holders. MTV Networks is the parent company of several channels, including Comedy Central, MTV, VH1 and Country Music Television (CMT).

"With clips posted on MySpace, there may be several different copyrights for each of those uses," said Pat Higdon, Executive VP/GM, Universal Music Publishing Group (UMPG). "From a publisher's perspective, one difficult aspect of the MySpace world is that there are so many uses that people forget there is someone who should be compensated. It's an error most people make due to ignorance, not malicious intent. Without thinking about it from the perspective of a copyright owner, people end up using something that has not been cleared through the proper channels."

With Matraca Berg, Billy Currington, Sara Evans, Jake Owen, Rivers Rutherford, Josh Turner and Troy Verges among the writers and singer/songwriters signed to its roster, UMPG represents a gold mine of content - and MySpace Music offers a new avenue for its proper use.

"We have songs that were written yesterday that will be hits tomorrow," Higdon said. "And we have hit songs that were written 25 years ago. We've got to protect all of those songs, yet at the same time we realize the only way we're going to have any revenue is to share them with consumers. As technology develops, it becomes increasingly hard to determine what works for the betterment of all parties. MySpace Music is a step in the right direction. The challenge is to give consumers what they're looking for but to not go out of business."

"MySpace Music provides artists and fans with comprehensive content pertaining to all musical genres imaginable, with Country Music being one of the fastest growing areas of the site," said Angela Courtin, SVP Marketing, Entertainment and Content, MySpace. "Many of today's hottest stars, including Taylor Swift, have credited MySpace Music as an instrumental tool in their career development. We've recently premiered material from Keith Urban and we look forward to even greater participation from Country artists as we continue to develop exciting and innovative new services for artists and fans."

The digital revolution has profoundly altered the ways that music is delivered to the consumer, but for Lee Ann Womack, the primary goal remains the same. "My job is to focus on the music," said the MCA Nashville recording artist, whose album Call Me Crazy debuted at No. 4 on the Billboard Top Country Albums chart. "And then, if the fans find out about it through radio or a Web site or a ringtone, that's great. The important thing is that it be a good song or a hit song or hopefully both. It's my job to create good music and then other people sell it for me. Nowadays, you and your team have to adapt or you'll be left behind."

Womack's comments are an important reminder that in the incessant quest to keep up with the latest technology, everyone in Nashville should remember that old adage that remains the industry's lifeline even in times of turbulent change: It all begins with a song.

© 2009 CMA Close Up® News Service / Country Music Association®, Inc.