Major players rewrite the music business
EmptyThe song may remain the same, but a chorus of digital developments may be reshaping the struggling music industry's business model.
On Thursday, News Corp.'s online social networking powerhouse MySpace launched a new competitor to iTunes with three major labels.
Earlier in the day, Apple said that its iTunes Store has surpassed Wal-Mart to become the No. 1 music retailer in the U.S. With more than 50 million customers, iTunes has sold more than 4 billion songs and features the world's largest music catalog of more than 6 million songs, Apple said.
Napster also had positive news to share Thursday, saying that it expects to report fiscal fourth-quarter revenue of $31 million, beating Wall Street estimates and the $29.1 million recorded in the year-ago period. Napster also said that it had about 760,000 subscribers at the end of March.
The most significant development, however, involves Live Nation, which is taking its largest steps yet in its transformation from a concert promoter into a full-fledged music company. The firm is close to a broad-based $150 million deal with Jay-Z that would cover recordings and touring, it said. The deal would even be bigger than similar recent blockbuster agreements with Madonna and U2. J
All this action was music to Wall Street's ears. Warner Music Group, Napster, Apple and Live Nation move significantly higher (Showbiz 50 on page 51).
MySpace unveiled its long-anticipated music offering in the form of a joint venture with Vivendi's Universal Music Group, Sony BMG and Warner Music Group. EMI Music Group is the only one of the major music labels not involved at the moment, but the company is expected to come to an agreement soon.
Exactly what the service offers, and for how much and when, still is a bit unclear. The service is no mere download store but rather includes a range of functionality, including a MySpace Music homepage, artist profile pages and individual member profiles.
The service will offer DRM-free downloads, free audio and video streaming supported by advertising, a mobile storefront powered by Jamba (owned by sister company Fox Mobile Entertainment) and "various sponsorship solutions," according to the firm.
Financial details, though, still are sketchy. MySpace CEO and co-founder Chris DeWolfe and COO Amit Kapur declined to disclose the nature of the revenue-sharing arrangements. They also declined to say how much digital downloads would cost, only saying that pricing would be "competitive."
Speaking during a conference call, DeWolfe said: "This announcement builds upon MySpace's history in the music arena. It was a real natural progression for us. It's not something we're just launching right now. It's something we're taking to the next level."
The company has 5 million musician profile pages, he said.
"We're excited about the combo of social network on one side and access to music on the other," Sony BMG global digital business head Thomas Hesse said. "Bringing those together is the winning combination."
One of the more interesting elements is the joining of forces to bring advertisers to the site. MySpace has a massive advertising presence, with $500 million in online ad revenue last year.
Part of the new MySpace Music venture involves sponsorship opportunities that would marry major brands to special music events. For instance, MySpace last year brought in State Farm Insurance to sponsor the live and online broadcast of the Projekt Revolution concert by Linkin Park and My Chemical Romance. More of the same is expected.
"We have a core competency in ad sales and ad sponsorship sales both from the technology perspective in ad-targeting as well as a sales organization of 200 people," DeWolfe said.
Various features of MySpace Music will be rolled out over the next three to four months, DeWolfe said. The service initially will launch only in the U.S., but MySpace expects to roll it out worldwide.
Live Nation stopped short of confirming published reports that the deal would give it a stake in virtually every aspect of Jay-Z's career and land him a potential windfall in excess of $100 million.
A person familiar with the negotiations between Live Nation and Jay-Z told The Associated Press the proposed 10-year deal was worth about $150 million and would cover three albums.
An e-mail seeking comment from representative of Jay-Z, whose real name is Shawn Carter, at William Morris Agency was not immediately returned.
Under the proposed deal, Jay-Z would be paid about $25 million upfront, another $25 million toward concert tours, and advances of $10 million for each of at least three albums. Additionally, Live Nation would pay Jay-Z about $20 million for publishing, licensing and other rights, and put up $50 million toward a joint venture dubbed Roc Nation through which Jay-Z would sign artists and engage in other entertainment projects.
Live Nation is currently producing a tour with Jay-Z and Mary J. Blige.
Jay-Z still owes his current label, Def Jam, another studio album.
He was president of Def Jam for three years but stepped down in December because he and the label's corporate parent, Universal Music Group, could not agree on a new contract.
Billboard's Antony Bruno and the Associated Press contributed to this report.