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Music Industry Acknowledges Existence of "Internet," Joins Myspace

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Fox, Sony, Warner attempt to siege Apple's MP3 empire.

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The partnership between MySpace and major record labels shows that the music industry has decided -- finally! -- to embrace the Internet rather than try to sue file swappers back to the old days.

MySpace Music is a partnership between Fox Interactive Media (NWS), Sony BMG, a 50-50 joint venture between Sony (SNE) and Bertelsman, Universal Music Group, a subsidiary of Vivendi, and Warner Music Group (WMG). Together, the companies control about 70% of the music market. Talks with EMI, which grabs about 10%, continue.

MySpace Music intends to break Apple's (AAPL) iTunes current dominance of the market. Good luck - Apple's popularity and the strength of its software make it hard to beat.

On a CNET news blog, a reader noted:

"The music industry [has] had 5 years to figure a way around Apple and couldn't do it because they're morons as [evidenced] by the lack of true musical innovation …Why would Myspacers, who already use ITunes/iPod, change if the Apple software/hardware gives them the best experience?"

MySpace will offer users free, advertising-supported music from the recording companies' catalogs, as well as MP3 downloads, without digital copy protection. That means users can store musical selections on their computers and play them anytime. MySpace Music and the record companies plan to make money by selling concert tickets, ringtones, t-shirts and other music-related merchandise, Portfolio reports.

Another note posted on CNET questions MySpace's business model.

"Most people go to MySpace for the sexuality in their attempts to hook up with other MySpacers. While the music is the angle that MySpace (and) Fox spin, it is obviously not the case. People go to iTunes exclusively for the media which is conveniently tied to the best-selling hardware in the business. There are alternatives to iTunes such as Amazon.com's offerings and certainly other media stores that sell MP3s."

A third reader says Amazon (AMZN) isn't glamorous, but effective.

"Amazon is the Wal-Mart of the Internet. Thanks for supporting the artists with 50-cents a song and killing my local book and record store. Amazon succeeds only because (its) website is nicely engineered. If not for that, (they'd) just be another reseller going down."

But MySpace Music has more in mind than the blog posts suggest. The company is expected to announce advertising partnerships with McDonald's, Sony Pictures, State Farm and Toyota. MySpace Music says the ads will be integrated into the site and will extend beyond the banner.

But the ad-supported streaming music market is becoming increasingly competitive. In December, imeem, a social music site, signed deals with the four major labels to provide access to their catalogs. Imeem now has about 30 million active users.

Is MySpace Music too late out of the gate? All it has to do is stop imeem - and then go after iTunes and the Apple cult.

(Note to DJ: cue Ravel's "Bolero" because this dance is going to be insistent and saucy.)
No positions in stocks mentioned.
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