News Corp.’s MySpace (NWS) has settled a long-running copyright lawsuit with Universal Music Group, a deal that gives the social network the go-ahead to launch its own music joint venture. Also on board: Sony-BMG and Warner Music Group (WMG). Not on board: EMI, the fourth major music label. The deal could be announced “in days,” says Reuters.
Our understanding of the settlement/structure, cobbled together from multiple sources familiar the deal(s):
- Universal gets a “huge” cash payment in return for settling the 2006 lawsuit, perhaps in the $100 million range. WMG and Sony-BMG will also get cash from the deal, but much smaller payments. We don’t know if these are considered advances or just rewards for participating.
- Universal, WMG and Sony-BMG all get minority stakes in the JV, which MySpace will control and operate.
- The site will offer free, ad-supported streaming music, and the labels will get a share of any ad revenue. It will also offer MP3 downloads, and the labels will get paid for those, as well.
This is a big deal for MySpace co-head Chris DeWolfe and News Corp. COO Peter Chernin, who have both been campaigning hard to get the deals done. We’re not sold that it’s a great idea for MySpace, since music is core to the site’s appeal, and cleaving it into a separate company could dilute that. But it’s a no-lose deal for the labels: Worst case scenario, they lose nothing (and Universal gets barrels of cash), and if it works out, they could have equity stakes in a potentially valuable business.
No insight into EMI’s non-participation. Will update if we get more.
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