MySpace mulls music joint venture: sources

By Kenneth Li and Yinka Adegoke

NEW YORK (Reuters) - MySpace, the top social networking site owned by News Corp, is in talks to create an online music joint venture with the four biggest record companies, sources familiar with the discussion said on Wednesday.

The talks are part of Rupert Murdoch's plans to distinguish MySpace, born as a haven for new music fans, from fast-moving rival Facebook as the premiere destination for digital media.

Plans for the service, tentatively named MySpace Music, are still in the discussion phase. One source familiar with the matter said MySpace has held talks with companies over the past few weeks to gauge interest in such a service, which would compete with Apple Inc's popular iTunes.

MySpace, Warner Music, Universal Music, EMI and Sony BMG declined comment. Amazon was not immediately reachable.

MySpace's big audience -- about 68.6 million U.S. unique visitors in January, according to comScore -- has made the prospect attractive to Vivendi's Universal Music Group, Warner Music Group Corp, EMI Group and Sony BMG, a joint venture of Sony Corp and Bertelsmann AG.

The venture is expected to offer free, advertising supported music streamed over the Internet, as well as a store that will sell songs playable on portable devices, including Apple's popular iPod. Creating a subscription music service as part of the offerings was another idea floated to potential partners.

The joint venture would likely involve music companies taking an unspecified equity stake in the venture in exchange for the rights for the music, with News Corp owning the biggest chunk, the source said.

It was not immediately clear who would fund the venture, another source said.

ITUNES KILLER

The initial plans include a music player that will play music and advertisements, which can be embedded on other sites, similar to online video software that can be attached to any Web site or blog.

It was not immediately clear if MySpace would build the store itself or strike a partnership with Amazon.com Inc for a so-called white label version for the service. The store may also sell merchandise from the companies.

A partnership could polarize the digital music retail world between News Corp and Amazon against Apple, whose iTunes online store dominates the music market.

Amazon has aggressively courted the music industry for its own digital music store. MySpace Music would also compete against a host of independent companies, including Imeem and Last.fm, which offer free music streamed over the Web.

The music industry, which faces another year of declining CD sales, aims to avoid repeating two big missteps of the past 20 years: giving away music videos for free to Viacom Inc's MTV and relying mainly on Apple for digital sales.

"Maybe record companies can avoid the mistake they made with MTV and own a part of it," one source said of the joint venture.