Remixed MySpace Music tries to catch the beat again

MySpace co-founder Chris DeWolfe came to a worrisome conclusion last year. The online community, which began as a place where musicians connected with fans, had stopped innovating.

Proof of how its musical star had faded became clear during a conversation with Interscope Records Chairman Jimmy Iovine, who was the producer behind Stevie Nicks and Bruce Springsteen and with whom DeWolfe had previously struck a deal to distribute CDs on a MySpace Records label.

Iovine didn’t mince words. When it came to music, “you guys are basically in our rear-view mirror; we’re going in different directions,” DeWolfe recalled Iovine saying. A representative for the producer confirmed the account.

At Iovine’s urging, DeWolfe boarded a plane the following morning to meet with Universal Music Group Chief Executive Doug Morris. The purpose: to sketch out a potential collaboration that would set the stage for today’s relaunch of the MySpace Music service.

Although MySpace was a pioneer in giving unsigned musicians a voice, the social network struggled to leverage that momentum into a revenue-generating business. That left the door open for Apple Inc. to emerge as the dominant force in digital music, eclipsing even familiar record stores.

Details of the new MySpace Music are now as familiar as the lyrics to any hit pop tune. MySpace’s 120 million worldwide users will be able to create and share playlists, as well as listen to songs or albums in its digital catalog for free. If users want to put the tracks on a portable music player, they need to buy them through Amazon.com.

However, this revamped MySpace Music falls short of the comprehensive one-stop online music store DeWolfe described last spring when he announced the service. At that time, he promised that music aficionados could not only listen to and purchase songs but also buy concert tickets or a band’s T-shirt.

Instead, MySpace went for the basics. Users will be able to search for music by artist, song title or album, then place it on a playlist that can hold as many as 100 tracks. The songs can also be added to a shortened playlist on a MySpace profile page, where others can hear it. Other features will be added over time.

The playlist is hardly an innovation. Other online services, such as the start-up Imeem and Last.fm, which is owned by CBS, offer free streaming and ways for friends to share their virtual mix tapes. These smaller rivals say they’re not worried about the competitive threat from MySpace, noting that they had a head start.

“Retrofitting an older legacy online service is like trying to turn the cargo ship toward the more nimble speedboat,” said Steve Jang, chief marketing officer at Imeem.

But what the News Corp.-owned MySpace Music may lack in originality, it makes up in reach.

“There are 120 million unique users every month on MySpace,” DeWolfe said. “It’s the largest music community in the world.”

Most of the revenue for MySpace Music, at least early on, will come from advertising. Music industry executives hope that a global audience will lure advertisers eager to reach a youthful, music-loving demographic. Indeed, MySpace has lined up as sponsors McDonald’s, State Farm, Toyota and Sony Pictures. These companies will stage various promotions, including Toyota Tuesdays, in which the auto company will offer free music downloads for users to transfer the tracks to portable devices.

The music industry could use fresh sources of revenue to supplement traditional CD sales, which have fallen precipitously since 2000. CD shipments in the U.S. are down 46% over the last seven years, and digital sales haven’t come close to making up that shortfall, according to the Recording Industry Assn. of America’s statistics.

“Our business, historically, is driven by the sale of recorded music,” said Rio Caraeff, executive vice president of Universal Music Group’s digital division. “We’re focused on diversifying our revenue streams, and ad-supported revenue is only one [of the many businesses] we’re supporting.”

All four major music labels -- Sony BMG, Universal Music, Warner Music and EMI -- together own a 40% stake in MySpace Music, so they stand to gain financially if the venture attracts enough advertising. Moreover, the labels hope that by creating a social environment where people can discover music, they’ll be more likely to buy it.

“We really believe there’s an opportunity to significantly grow the total digital music space by providing the right thing for the consumer at the right time,” said Michael Nash, executive vice president of digital strategy for Warner Music Group.

But by aligning itself with the corporate music establishment, MySpace risks losing its “indie” feel, said Dave Kusek, vice president of Berkleemusic.com, the online extension school for the Berklee College of Music in Boston. “It’s a complete 180 on their part, in terms of where they came from and what made them so cool, and really what attracted their initial audience,” Kusek said.

Still, if MySpace succeeds, many can profit, said Ali Partovi, CEO of ILike, an online music recommendation service.

“Radio and MTV are the bulk of where the advertising money is spent today for people who want to advertise with music,” Partovi said. “That’s not where people are spending their time, so the more successful players there are helps all of us.”

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