Stepping aside from the visions of grandeur, MySpace Music is more than anything an experiment in scale. The site has tens of millions of users, many of who fall into the demographic that most aggressively consumes music. Additionally, virtually every major artist under the sun already has a presence on the site, with tens of thousands of “friends” to whom they can sell music, merchandise, and concert tickets.
To tap into that scale, MySpace has clearly been paying attention to other online music services that have been seeing success like imeem, last.fm, and iLike. At the heart of the new offering is free, ad-supported streaming, enabling users to listen to as much music as they want via artist’s pages and their friend’s profiles.
And that’s where the business model kicks in. While users can browse and listen to as much music as they’d like, to get it onto their iPod or their cell phone, they’ll need to pay up. MySpace has partnered with Amazon to deliver mp3 downloads, while mobile content will be handled by Fox Interactive sister company Jamba. MySpace will also be offering its own tools for pushing things like concert tickets and merchandise – products that can be advertised through existing viral channels like bulletins sent to an artist’s friends.
While all of this sounds amazing, to cover the costs, MySpace is going to need to make some serious money. According to Fortune, "Its label partners want a penny each time someone listens to a song on an ad-supported service. That means MySpace Music needs to charge $10 for every 1,000 ad impressions just to break even."
The strictly CPM-based thinking may be a bit narrow minded though. While MySpace may barely break-even or even lose money on the free streaming portion of the service, if they are able to gain significant traction with more profitable music peripherals like ringtones and concert tickets, the service could be an absolute cash cow. And the MySpace distribution model – friends, bulletins, and increasingly activity streams – makes music more viral than ever and offsets some of the industry’s typically enormous marketing and promotion costs.