AFI BLOG: Media and Technology

Business Week

With CD sales plummeting and music fans swiping songs off the Internet, the major record labels can use all the friends they can get. So Michael Nash, incoming head of digital strategy at Warner Music Group (WMG), is trying to make a few new ones. On Apr. 3, Warner is expected to team up with social-networking site MySpace (NWS), Sony BMG, and Universal Music Group to launch a joint music venture. MySpace Music will let people listen to tunes and watch videos for free on the Web, as well as buy merchandise, concert tickets, and music through downloads, much like on Apple’s (AAPL) iTunes. “The entire music industry has learned that the consumer is aligned with digital culture,” says Nash. “The perspective has shifted.”

Other record labels are likely to follow suit. MySpace, part of News Corp. (NWS), has held talks with all four major labels in recent months. EMI, the only major that hadn’t finalized a deal as of late Apr. 2, could do so in the near future.

The MySpace joint venture is one of Warner Music’s most aggressive moves yet on the Net. The idea is to expand beyond the industry’s predominant business model of simply selling music through retailers such as Apple and Wal-Mart (WMT). MySpace Music will be set up as an independent company, and the record labels will have equity stakes in the venture. Warner and the others will also get a cut of the advertising fans see on MySpace as they listen to tunes. “We realized we had an opportunity to either repeat the mistakes of the past,” says Nash, “or we could fashion a new kind of collaboration based on a new business model.” …more