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MySpace Music Launches, Challenging iTunes

MySpace
MySpace

Thursday MySpace is launching its new music service, allowing users buy song downloads and listen to free streaming audio.

MySpace, owned by News Corp, has made deals with the four music giants, EMI Group, Warner Music Group, Universal Music Group, and Sony BMG Music Entertainment, which are also equity partners in the venture.

Free audio streams will be ad-supported, with McDonald's, Sony Pictures, State Farm Auto Insurance, and Toyota on board to target the site's younger demographic. The paid downloads will be through an Amazon.com partnership, both Amazon and MySpace taking a cut. MySpace hopes this will just be the beginning, planning to eventually sell concert tickets and band-related merchandise.

MySpace has been a go-to destination for music lovers; about 35 million of MySpace's users regularly visit music-oriented pages. (Garage bands can set up profile pages to gain a following and make money.) Now it's taking its reputation for music up to the big leagues. The real competition in this space is Apple's iTunes, which has about 80 percent of the music download market.

The music labels are also eager to have a competitor in the space and to grow their revenues at a time when CD sales have fallen off dramatically. And MySpace is counting on those ads to provide a guaranteed revenue stream.

MySpace's free ad-supported music differentiates it, but does it give an advantage? It may give a great free service to consumers listening to music from their laptops, but will it deliver eyeballs to advertisers? (Will people look at ads while listening to music?). MySpace does have remarkable scale--120 million unique monthly users--which gives it a large population to get this experiment started.

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