How MySpace Music could beat iTunes

Melissa Chang — Fri, 04 Apr 2008 12:00:19 -0400

This was a big week for the music business. Not only did Apple's iTunes store pass Wal-Mart as the number-one music retailer on the planet, but social networking site MySpace announced that it will launch a music store to compete with iTunes -- MySpace Music.

Apple is a going to be tough to beat. It's been on quite a tear -- in the past five years, it has established itself as the leading online music download business, released the first mainstream downloads store (iTunes), and it created the iPod, which remains the most popular family of devices for playing digital audio files. The growth of Apple's combined music businesses has been phenomenal; the company has sold more than 110 million iPods and now boasts more than 50 million iTunes customers who have downloaded more than 4 billion songs.

But MySpace Music has a chance to beat iTunes. And the secret to its potential victory lies in the hands of the musicians that the social network has supported since MySpace's inception. MySpace was the first such site to empower musicians, making it simple (and free) for any band or artist to create a Web presence complete with streaming music, an upcoming tour schedule, and a way to enlist "fans" -- other MySpace users who become "friends" with the band via MySpace's social networking capabilities. Even now, many independent musicians reach their fans primarily through their MySpace (note that the word has become a standalone noun -- for musicians, it's no longer "my MySpace page," but simply "my MySpace").

The implications of the MySpace announcement are potentially enormous. The bottom line is this: If MySpace provides bands with the names and email addresses of all the people who download their music through MySpace Music, MySpace will beat iTunes. If MySpace does not share its data with artists, MySpace will put a dent in the iTunes market share but will not come anywhere close to beating iTunes.

End of story.

Independent musicians know that their fans are their lifeblood. Kevin Kelly, co-founder of Wired magazine, recently wrote about this in an article titled "1,000 True Fans." In that article, he explains that 1,000 fans spending approximately $100 per year in support of a musician is enough for an artist to make a living. Marketing guru Seth Godin ups the numbers a bit, but says essentially the same thing:

"Many musicians have understood that all they need to make a (very good) living is to have 10,000 fans. 10,000 people who look forward to the next record, who are willing to trek out to the next concert. Add 7 fans a day and you're done in 5 years. Set for life. A life making music for your fans, not finding fans for your music."

But musicians need the names -- and email addresses -- of their fans. iTunes does not provide that data to artists. Neither does Amazon's MP3 store. This is also one of the current limitations of MySpace's music pages -- an artist can have fan "friends" but cannot access their contact information. If MySpace retools this, providing the data -- even just of the individuals who purchase a download, a concert ticket or merchandise from MySpace Music -- it will not only be able to capitalize on its 110 million registered users and 30 million active music participants, but it will quickly and powerfully get the indie music community on its side.

Providing fan data will also get MySpace the support of more mainstream musicians who are also realizing the importance of owning the names -- and contact information -- of their fans. Musicians like 50 Cent are starting their own social networking sites (his is called Thisis50.com), because, as 50 Cent's new media director acknowledges, "The thing that separates Thisis50 from MySpace is we control the e-mail database. We can e-mail members if we want to."

Of course, it will help MySpace Music that three of the four major record labels (so far) are teaming up with them to pioneer a new ad-supported streaming model. The labels are likely to throw their marketing resources behind MySpace Music as they desperately try to figure out how to make money online and reverse their flagging businesses. It's also important to them that any new online revenue models don't involve Apple, which the labels think has too much control over pricing and distribution. But ultimately, it is the five million musicians, bands, artists and independent labels that "have a MySpace" and are the secret to MySpace Music's potential success.

(Disclosure: I am the president of Fat J Records, an independent record label based in Boston )

Melissa Chang is the founder of Pure Incubation, an Internet incubator based in the Boston area. Her blog is at www.16thletter.com.

More news, commentary, and predictions from The Industry Standard:

Prediction: Apple's iTunes to displace Wal-Mart as largest music retailer in U.S.
Prediction: Apple bundles unlimited iTunes with iPods, iPhones
Prediction: Facebook overtakes MySpace in international traffic
Fred Wilson: Something important is on the horizon in the music business
Opinion: 10 'Net services that will succeed (and 10 that will probably fail)

Note: Anonymous comments on The Industry Standard are disabled. To leave a comment and participate in the Standard's prediction market, please register first.

How MySpace Music could beat iTunes

Melissa Chang — Fri, 04 Apr 2008 12:00:19 -0400

End of story.

"Many musicians have understood that all they need to make a (very good) living is to have 10,000 fans. 10,000 people who look forward to the next record, who are willing to trek out to the next concert. Add 7 fans a day and you're done in 5 years. Set for life. A life making music for your fans, not finding fans for your music."

(Disclosure: I am the president of Fat J Records, an independent record label based in Boston )

Melissa Chang is the founder of Pure Incubation, an Internet incubator based in the Boston area. Her blog is at www.16thletter.com.

More news, commentary, and predictions from The Industry Standard:

Prediction: Apple's iTunes to displace Wal-Mart as largest music retailer in U.S.
Prediction: Apple bundles unlimited iTunes with iPods, iPhones
Prediction: Facebook overtakes MySpace in international traffic
Fred Wilson: Something important is on the horizon in the music business
Opinion: 10 'Net services that will succeed (and 10 that will probably fail)

Note: Anonymous comments on The Industry Standard are disabled. To leave a comment and participate in the Standard's prediction market, please register first.

How MySpace Music could beat iTunes

Melissa Chang — Fri, 04 Apr 2008 12:00:19 -0400

End of story.

"Many musicians have understood that all they need to make a (very good) living is to have 10,000 fans. 10,000 people who look forward to the next record, who are willing to trek out to the next concert. Add 7 fans a day and you're done in 5 years. Set for life. A life making music for your fans, not finding fans for your music."

(Disclosure: I am the president of Fat J Records, an independent record label based in Boston )

Melissa Chang is the founder of Pure Incubation, an Internet incubator based in the Boston area. Her blog is at www.16thletter.com.

More news, commentary, and predictions from The Industry Standard:

Prediction: Apple's iTunes to displace Wal-Mart as largest music retailer in U.S.
Prediction: Apple bundles unlimited iTunes with iPods, iPhones
Prediction: Facebook overtakes MySpace in international traffic
Fred Wilson: Something important is on the horizon in the music business
Opinion: 10 'Net services that will succeed (and 10 that will probably fail)

Note: Anonymous comments on The Industry Standard are disabled. To leave a comment and participate in the Standard's prediction market, please register first.