Project Playlist in Sony BMG licensing deal

Service is being sued by major labels and the RIAA

DENVER -- Just days after getting banned from MySpace, Project Playlist has struck a licensing deal with Sony BMG. The deal gives Project Playlist users direct access to the Sony BMG catalog of both music tracks and videos. Financial details were not disclosed.

The major-label licensing deal is a big step forward for the playlist-sharing service, which is being sued by the other three major labels -- Universal Music Group, Warner Music Group and EMI Music -- as well as the RIAA for copyright infringement. Project Playlist allows users to upload music to create playlists that other users can then stream, but until the Sony BMG deal has done so without paying labels a licensing fee.

On Friday, MySpace blocked the playlist-sharing service from the entire social network, citing requests from several major label partners.

"MySpace has received notices of infringement about Project Playlist at different times from several of the major music companies currently suing Project Playlist," reads a MySpace statement. "Per our policy of taking very seriously the requests of rights holders to block access to third party sites that are believed to be infringing, we have evaluated the requests of the major music companies and determined that it is in our best interest not to allow Project Playlist widgets on MySpace, and effective immediately, we will no longer be allowing these widgets within the MySpace platform."

While the service is now gone from MySpace, it remains active on competing social network Facebook. The company claims more than 40 million users.

If the music industry truly wants digital distribution to make up for falling CD sales, it needs to stop treating retail CDs as its primary revenue generator by this time next year, according to a recent Gartner research report.

In "Christmas 2008: The Last Year of the Retail CD" the analyst group recommends the music industry distribute music online first, through digital retailers, social networks and direct-to-fan models. It recommends limiting CDs to promotional items that can be sold or given away at concerts.

"By propping up the CD business, rather than fully investing in online distribution alternatives, the major labels and the larger music industry have neither succeeded in stamping out piracy nor done much to recreate the business models of the old 'record business,' " said Gartner research vp Mike McGuire in a statement. "Music labels should instead emphasize 'digital first,' making all new releases and catalog issues via digital services and moving CDs to an on-demand publishing mode."

McGuire points to the freefall drop in CD sales worldwide -- from 91% of revenue in 2005 to 77% in 2007 -- as well as the shrinking floor space dedicated to CDs by retailers as his rationale. Meanwhile, 77 million U.S. households will have broadband connections by 2012.