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Source: MySpace Music considers subscription model

Ad-supported music continues to take it on the chin. A high-level source says MySpace Music is pushing to dump free streaming in favor of a paid model.

MySpace Music, that long slumbering music unit of the struggling social network, is considering whether to begin charging users, according to a source close to the negotiations.

Rupert Murdoch and News Corp. have been bearish on the free model. Dan Farber for CNET

The source said Wednesday that MySpace Music execs have spoken to some of the top labels about creating a subscription service. This apparently confirms a report published Tuesday by the Web site of Side-Line, a music magazine. Citing sources close to News Corp., parent company of MySpace, the publication said it wants to move MySpace Music to a paid model and that it's burning through a lot of money each month.

MySpace Music is a joint venture operated by News Corp. and each of the top four major labels.That MySpace is considering a move to a paid model isn't a surprise. First, MySpace Music has underachieved in terms of generating revenue, multiple music industry sources said. "Numbers have been dipping of late," said a music industry source. Meanwhile, News Corp. Chairman Rupert Murdoch has been a vocal proponent of charging for online content, at least for some of his company's digital ventures, including video portal Hulu and the online arm of The Wall Street Journal.

Warner Music Group, the third largest record label in terms of market share, has also apparently grown skeptical about ad-supported music services. According to the source who spoke to CNET, MySpace Music would like to launch a subscription service before the end of the year.

Courtney Holt, the music industry veteran who MySpace hired away from MTV in 2008 to operate its music division, issued a statement in response to questions from CNET.

"We're always exploring new monetization opportunities, but have no plans to change our current service which includes streaming free music," Holt said.

MySpace Music's discussions with the labels come at a time when the practice of offering free streaming music to listeners PCs and then paying for the songs by selling advertising, appears to be coming to an inglorious end. Many of the players that attempted this risky model have perished (SpiralFrog and Ruckus), or been acquired (Imeem).

For MySpace, prospects look almost as bleak. When Murdoch first acquired the social network, he was applauded for being an old media baron who understood the value of new media. Well, five years and $500 million later, MySpace has fallen out of favor with the all-important 18- to 35-year-old demographic, been completely eclipsed by rival Facebook, and has made hardly a peep about its stated plans to turn itself into an entertainment hub.

News Corp. is apparently scrambling to replace the $900 million advertising deal with Google that runs out in August. Google cut that deal when MySpace was still the social-network leader. News Corp. won't make anywhere near that amount now.