Are MySpace execs really proposing a Hulu-like joint venture with the music labels? Yes they are, say people familiar with the discussions, first reported by PaidContent.
OK, so what would what look like? Here’s where it gets fuzzy. News Corp.’s social network, which has been talking about the idea for months, apparently wants to launch some sort of ad-supported music portal, and is proposing to give the four big labels equity in exchange for content.
We believe MySpace is proposing a site that would offer free, on-demand streaming music, which is a model the labels are increasingly comfortable with. We don’t believe they would offer free downloads, which is much more difficult to pull off. Just ask QTrax.
OK, so who would join in? Fuzzier. In order for the service to work, MySpace would eventually need all four major labels, and so far we don’t know of any who are close to signing on. (Staci Kramer quotes a source saying “that could change in a matter of weeks.”)
Another precursor to a deal: Universal Music Group would have to settle the lawsuit it has filed against MySpace for copyright infringement. (Which is certainly doable — the two sides have been in on-and-off talks).
OK, so what would the incentive be for the parties putatively involved? The fuzziest. The best argument for Hulu is that it gave NBC U and News Corp. a way to distribute their video without having to work through Google. In this case, we imagine, MySpace would pitch the idea by substituting the words “Steve Jobs” for “Google.” But that’s not a great analogy, since Steve Jobs has hammerlock on music sales, but has expressed zero interest in an ad-supported model.
And we’re stumped about any other upside: One source tells this has been pitched at various times as a possible IPO, but we can’t imagine taking a digital music startup to the equity markets right now. Meanwhile, this would be a huge distraction for MySpace, which is still grappling with operational and sales issues. And in order to make the economics work, the labels would likely have to offer their music at a much lower rate than they have for third-party sites like iMeem, which would trigger a howl of protest from their current partners — as well as federal antitrust types.
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