In defence of Myspace Music

Posted by | Aug. 20, 2008 | 3,614 views


Bob Lefsetz in a post last week slated Myspace music and its major label partners attempt to build a proposition, which may be aimed at taking the digital music retailer monopoly status away from iTunes. Firstly I would like to know does Lefsetz support a monopoly? As iTunes is a monopoly under both the definition of EU as well as US competition laws with more than a 65% market share. Has he asked his own US government why they have not acted to rectify this clear breach of the United States own competition legislation?

Lets get something straight, and that is iTunes rules the current digital music retail space for three key reasons:

a.) It was first to market (for legal downloads)
b.) The iTunes interface is sexy and beats all current competition
c.) It fought against opening up its IP to prevent interoperability between other legitimate
digital retailers and hardware manufacturers. This prevented new retailers from selling music that
could be played on the iPod and also prevented tracks purchase from iTunes being easily
transferred to be played on different MP3 players.

Points a.) and b.) are all fine and dandy but lets be very clear, the primary reason iTunes has still been able to hold onto its monopoly status is noted in point c and that is because of Apple’s blatant anti-competitive behaviour reminiscent of Microsoft tactics in the late 90s. In many ways Apple has acted like the corporate bully that is Microsoft.

If the iPod ecosystem was opened up, as it should have been do you not think that legal sales of digital music via alternatives to iTunes would have improved and that would be good for the industry as a whole? I’m sure no one in the industry believes that one company owning a monopoly stake in both sides (retailing and hardware player) of the digital music retail ecosystem is healthy for all parts of the music business value chain?

Yes Myspace music and the social network generally are based around the advertisement-funded model. Show me a web 2.0 music model that is not based around advertising. What is Bob’s problem with that? It will provide a legitimate route for music fans to get their music for free. Due to its large user base of over 110 million regular users, Myspace music will have a very real chance of taking on the digital music retail monster that iTunes is.

Lefsetz states that if the record labels are going to have to do two things to leap in front of iTunes they are; lowering the digital retail price of music and to ‘deliver more cluck for the buck’. Myspace music is attempting to deliver on this by taking out the whole price proposition by offering it for free to consumers as opposed to the a-la carte price music iTunes retails. So where is the comparison? Even if they offer all models ad funded, al-la carte and possibly subscription what is the problem with that?

On the interface front (pun intended), iTunes, and all of Apple’s hardware products do set the standard in terms of UI. Constant raising of the bar in terms of exceptional user experience is a good thing and helps drive competition in terms of furthering the end user experience. Just because Apple is the leader now, does not mean it will be in the future.

I do agree that the Myspace interface is nowhere near as sexy as it could be. That does not mean it will not improve over time. The key reason why I view Myspace music as the only key potential competitor to iTunes is simply down to its large user base, the fact it still is the global first point of call web destination for artist music sites (signed and unsigned). Furthermore its USP is music for free, funded by advertisements. Oh and it is actually a ‘partnership’ between the four major labels and Myspace – a deal with the indies is also in the pipeline as well. Yes there are certain issues that require fine-tuning, but they will be ironed out.

Drilling down, I agree the key issue is that labels and reporting transparency is of paramount importance and perhaps requires collective leveraging from both digital retailers and artist’s representatives all insisting on an increased level of reporting transparency to music creators such as artists and song writers.

On a final note I will end in agreement that subscription and labels moving towards an ARPU based retail model will have a key part to play in the future evolution of the retailing of music in the digital realm. Moving forward I do view mobile as the panacea for this proposition.

The music business has been trying out new business propositions for a number of years now. However the ROI on advertising funded and subscription models to date have so far left a bad taste in-both, labels, publishers and most importantly artist’s mouths – whether that is eMusic, Napster or Omniphone models to name a few. So Bob labels have been doing and are continuing to try new business propositions, just ones you are not very keen on.

For those that have not read the post by Bob Lefsetz that I refer to above, you can check it out here.

Other readers also read:

MySpace Music: Going Freemium?

MySpace Music Is No Spotify Challenger

What’s In It For Me?

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Posted by on Aug 20 2008. Filed under Business Models, Digital, Gadget & Services, Labels, Marketing. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

3 Comments for “In defence of Myspace Music”

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  2. Apple has and actively still stifles competition by virtue of its reluctance to move forward on the interoperability issue. This has effected the growth of digital sales and a decent level playing field in terms of new competitors entry to market.

    Those two reason alone necessitate regulatory action.

    No matter what industry it is if it is in breach of competition laws government should act. A monopoly is a monopoly is a monopoly. Monopolies are not good for most importantly consumers (or in this instance music fans), content owners such as record labels and most importantly they are not beneficial to artists.
    Companies do try to compete but Apples anti-competitiveness stifles opportunity and as such should be rectified. If Apple does not want legislative intervention then it should make a positive move on the interoperability issue. This is the key to opening up REAL competition…perhaps apple is scared of REAL competition?

    We all know Apple is years ahead in terms of competitive advantage with reference to UI, so what is the problem with having them come to the table interoperability wise?

    Also on the resources front…for all of Europe iTunes has had only one primary contact for all indie labels to deal with and based out of Luxemburg…

    Obviously margins are tight for all digital music retailers. The music industry should be welcoming new entries into the digital retail space who help to drive competition, not slating them!

    My understanding is that Myspace wants to grow organically, do it will be a slower but more long-term focused roll-out of the music store in Europe.

    Personally, I believe that apple/iTunes should be fined by the EU much in the same was as Microsoft has been in relation to its anti-competitive behaviour. If it will not come to the table with interoperability it should be forced to.

    Barriers to consumers easily transferring tracks from one MP3 player to another need to be broken down. With apple fighting interoperability, consumers are the ones who loose out and content owner should be more worried about consumers and the impact interoperability issues have on them.

    By allowing music purchases from other stores Apple could perhaps even increase its iPod sales…some food for thought

  3. Dominique

    There are two aspects to this post that I completely disagree with. First, iTunes in not a monopoly in the sense that is stiffles competition. Anyone else – anyone – could have come up with an end to end solution to digital music which would include a hardware product and proprietary format. The market was there for the taking. The fact of the matter is that iTunes did it first and did it well. Essentially iTunes had no real competition for a long time and because of that fact should not be penalized for being a monopoly. Microsoft tried and failed with the Zune and their store. Anyone else is free to compete with iTunes and do.

    Myspace will not succeed for one vary different and non-music reason – resources. I have interviewed with them for several music rols and the fact of the matter is that they want to hire too few people to do too many things at a cheap cost. I suspect that the head of myspace music hasn’t been found because, quite frankly, they are setting this person up to fail. As an example in Europe they are hiring just one person to manage the music stores, create and maintain strategic partnerships, deal with licensing, managing ticket, create contracts, and create the music store – all across 18 different countries! They only resource this person would get would be a lawyer. I don’t think that one sane person would even be up for the challenge.

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