MySpace Music to launch in days: sources

NEW YORK Wed Apr 2, 2008 4:40pm EDT

NEW YORK (Reuters) - News Corp's NWSa.N MySpace, the largest online social networking site, will unveil a music joint venture with at least three major music companies within 5 days, sources familiar with the matter said on Wednesday.

Called MySpace Music, the service will be integrated with popular teen hangout MySpace.com and is being touted as a rival to Apple Inc's (AAPL.O) iTunes online music store. It will offer music streaming, MP3 downloads, concert tickets, ringtones and merchandise, the sources said.

News Corp, Sony BMG Music Entertainment, Vivendi SA's (VIV.PA) Universal Music Group and Warner Music Group Corp WMG.N will each have a stake in the venture, the sources said. It is not clear if EMI Group, the fourth-largest music label, will be involved.

"It's really creating a robust monetization component to MySpace and having a focused music effort that could be the MTV of a new generation," said a music industry executive who asked not to be identified before the deal is formally announced.

MySpace is already one of the biggest promoters of music on the Web, with more than 68.6 million unique visitors in the United States in January, according to data from comScore.

Music companies believe a large part of the site's success has been driven by their artists' music, which fans upload and add to their personal pages.

"If you give people content they want and you make it easy to use and share, they won't even know they're in a commercial environment," said Forrester analyst James McQuivey.

The music companies have been in talks with MySpace for several weeks, but a key obstacle is a 2006 copyright lawsuit filed by Universal Music against MySpace. One of the sources familiar with talks said progress was being made and the suit could be settled in time for the announcement.

It was not clear when MySpace Music would be launched.

MySpace declined to comment. The music companies either declined to comment or were not immediately available.

NEGOTIATIONS

Faced with dwindling album sales, music industry executives have been negotiating hard to avoid 'another MTV,' the music cable TV network owned by Viacom Inc VIAb.N. Music companies had provided MTV with free music videos, seeing the initiative as promotional, and failed to profit directly from the channel.

"Music companies kinda built MTV with free content and then MTV became more valuable than the music companies," said the music industry executive.

Doug Morris, chief executive of Universal Music, the world's largest music company, has led the challenge on MySpace. Late in 2006, Universal sued MySpace for copyright infringement by enabling users to reformat videos to be played back or sent to others.

That copyright suit has been one of the hold-ups in making an announcement. Morris told Reuters soon after the suit was filed in 2006 that he expected News Corp to settle.

Morris and other executives also toughened their stance with Apple's iTunes, with some of the majors refusing to sign long-term deals with the digital music retailer, now the second-largest retailer of music in the United States.

MySpace has lacked a revenue stream for the major music companies to make money before now, though it had started making moves to rectify that.

Last October, Sony BMG, the second-largest music company, reached a licensing agreement with MySpace to stream music videos of its artists including Britney Spears and Beyonce.

As part of the deal, MySpace shares advertising revenue with Sony BMG, which is jointly owned by Sony Corp (6758.T). and Bertelsmann AG BERT.UL.

(Additional reporting by Kenneth Li; Editing by Braden Reddall)

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