MySpace Music: Here comes the latest iTunes killer

We've seen iTunes challengers come and go, but none has had the audience or music credentials of MySpace.

Imagine digital music without Apple as the marquee act.

That's what the music labels want. For years, they have wished for a legitimate challenger to wrest away some of the bargaining power Apple has wielded as the No. 1 online music seller. So, here we go again: it's another iTunes killer.

On Thursday, MySpace executives unwrapped MySpace Music . Backed by the four largest record companies and MySpace parent company News Corp., the music service will offer much of what iTunes does and more, according to MySpace's managers. But haven't we heard this before?

Urge, Sony's Connect, and SpiralFrog are only a few of the services once predicted to unseat iTunes. Of this group, only the troubled SpiralFrog continues to limp along. The other two no longer exist.

MySpace is up against music retail's supreme power in Apple's iTunes. The new service must compete with not only one of the most successful consumer-electronics makers of all time, it must do battle with arguably one of world's greatest marketers and retailers in Apple CEO Steve Jobs. Apple has dominated Internet music sales the past six years and now iTunes can call itself the country's largest music retailer--online or off--after besting Wal-Mart in sales during the first two months of 2008.

Apple's iTunes has had years to establish a large and loyal following and to develop systems that make shopping at the site simple and easy. And you can't underestimate the power of having iPod owners already plugged into iTunes.

Besides music, Apple has forged relationships with movie studios and TV networks that enable iPod owners to watch feature films and TV shows on their devices. But even though Apple has a head start with iTunes, the service will have to keep up with the industry's rapid changes.

"MySpace Music is not a serious threat for at least two or three years," said James McQuivey, an analyst with Forrester Research. "Apple's iTunes succeeds because of its connection to an amazingly popular device. As long as the iPod is central to their music strategy, they will continue to be a force. But the question is whether iTunes can adapt to Music 2.0."

The next stage in the music industry's evolution will be an all encompassing model that melds social networking, e-commerce, and music discovery.

MySpace Music is unlike any iTunes challenger that has come before. An audience of 110 million people from all over the world visit MySpace every month. About 30 million listen to music on the site, and more than 5 million music acts rely on the site for promotion.

So influential has MySpace become in the music world that last year when EMI was preparing budget cuts, it considered a plan to reduce expenses for discovering new artists by getting talent scouts to spend less time in music clubs and more on MySpace.

Nothing has done more to expose Apple to competition than the death of digital rights management. Although Jobs called for the end of DRM, there's no question that it provided iTunes with protection from competitors. With the major record companies adopting unprotected MP3s, iPod owners are free to buy songs from any music store selling DRM-free songs. Music fans are no longer locked into iTunes.

"Apple's advantage lies in the Apple iPod connecting to iTunes," said Susan Kevorkian, an analyst with research firm IDC. "But that advantage is being dissolved by MP3s that are compatible with more and more online music services. And the social networks have the opportunity to offer new dimensions to the online-buying experience. Not only can they offer information on specific bands, but they also have the ability to easily connect users to each other and share taste-making information."

MySpace's intent is to create a total immersive music experience, the digital equivalent of walking into a large record store, one that features listening posts, CDs, DVDs, vinyl albums, and in-store concerts, according to McQuivey.

"What MySpace Music does is establish a new level of expectation about what music could be in people's lives," McQuivey said. "Apple might find itself following for the first time."

But here is what MySpace should do if it seriously intends to challenge iTunes.

MySpace has to build a site that's as easy to navigate and buy music from as iTunes. That's not an easy feat. Plenty of others have failed at this, and one of the main criticisms of MySpace is that the site is cluttered and difficult to move around on.

It also needs to undercut Apple on price. That's what Amazon did. The Web's biggest store offers most songs for 79 cents, while Apple sells them for 99 cents. The company has yet to report how the strategy has worked, but nothing speaks to consumers like a bargain.

Apple offers movies and TV shows, so MySpace should cut similar deals with Hollywood. Why stop at music? If you're going to compete with iTunes, you must have at minimum everything Apple offers. That also means signing EMI, the only label among the four majors not to join the venture.

Even Apple fans should want MySpace to challenge Apple. Jobs and company have always been at their sharpest when pushed.

Rock on, MySpace.

 

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