MySpace versus iTunes: The Battle Begins

In a previous post, I explored the up-and-coming music platforms on two social networking sites, MySpace and Facebook, and the implications each will have on today’s music culture. Presently, I would like to return to this topic in light of MySpace’s timely new developments and address the challenges that Apple’s iTunes music store will accordingly face. Since my initial post two weeks ago, MySpace Music (see logo, below left) has already made major changes to its site, signing a joint deal with three major record labels including Sony BMG, Warner Music Group, and Universal Music Group. Given the chance to share in MySpace Music’s profits, Universal unsurprisingly decided to quietly drop its 2006 copyright infringement lawsuit against MySpace, one of the chief reasons why the site did not debut when MySpace announced its plans to enter the music business two years ago. No money is expected to trade hands up front in this new business venture; rather, the labels are offering content rights to MySpace in exchange for minority equity rights in the service, expected to launch later this year. Additionally, the labels hope to benefit from the advertising revenues that will largely fund the platform. More than anything else, however, the record companies seek to expand the number of alternatives to the iTunes music store in their favor. As negotiations with the record companies continue in full force, it seems that nothing can stop MySpace Music from entering the industry and setting new standards for music accessibility and consumption.

Apple may beg to differ, however. These talks are occurring at a momentous time in the industry, because as of this past week, iTunes has finally overtaken Wal-Mart as the number one music retailer in the nation, totaling nineteen percent of all music purchases. With paid downloads accounting for thirty (and rising) percent of all sales and iTunes serving as the primary venue for these transactions, some, such as Forrester Research analyst James McQuivey, argue that MySpace Music will not be an impending threat to Apple because of iTunes’ “connection to an amazingly popular device [the iPod]”. Not to mention that iTunes reaches a wide international audience, whereas MySpace Music is currently only available within the United States. But what will happen when users can receive DRM-free downloads from MySpace instead, all the while in a more interactive environment that offers fans a personal connection to their favorite artists? Blogger Jacqui Cheng of Ars Technica believes that the new service “could give giants like iTunes and Amazon MP3 a run for their money.” With thirty million users who identify themselves as active members of the music community and five million artist pages that offer interactivity in the form of messages, feeds, and polls between the artist and the fan, MySpace Music might just steal iTunes' thunder. And iTunes is not at all oblivious to this possibility.

In fact, Apple representatives pulled what may look like a desperate stunt at last night's Family Force 5 concert, passing out $30 iTunes music gift cards to fans as they walked out the door. Last100's blogger Daniel Langendorf, who attended this show, made an observation of considerable note: the performers themselves announced to fans, “check out this song when you go home on MySpace!” This new trend on behalf of performing artists to recognize and promote their MySpace pages, combined with Apple's gift card giveaway, serves as a clear indicator that Apple and iTunes are not viewing the upcoming service without apprehension. Additionally, whispers are circulating that Apple has proposed a new "all-you-can-eat" music download package that would allow users unlimited iTunes downloads with their purchase of an iPod (see below right-hand iTunes + iPod ad graphic). While the price of iPod hardware would increase somewhat, Apple would pay a certain premium to the labels for the songs, such that no subscription fee would be necessary. As long as heavy music buyers switch to the iPod plus music bundle and some infrequent buyers jump on board as well, the plan would be profitable for Apple (if interested in the number crunching, see this recent article from Coolfer). Ideally, users would be satisfied, and if this service were enacted effectively it would certainly reduce MySpace's threat to Apple. Interestingly, though, the mp3 player manufacturer Zune has been offering a similar option with its devices since 2006, such that Apple's download package is not an entirely new idea. However, despite technology that is closely comparable to the iPod, Zune's plan never really caught on among the greater public, perhaps due to its smaller reach and lack of brand name power. Already excelling free of these limitations, I expect that Apple's proposal will experience far greater success.

On the subject of Apple's radical yet captivating potential counter-moves to MySpace Music, consider the following: as an April Fool’s joke, news of Apple purchasing Universal flooded the inboxes of industry officials. The hoax, which announced that all Universal tracks would be available through iTunes for a mere fifteen cents, temporarily convinced even Wired.com blogger Eliot Van Buskirk, who admitted that although somewhat outrageous, rumors of such an acquisition have been spreading for years. Despite the fact that the April Fool’s revival solely aimed to deliver humorous shock value, talks of this Apple-Universal buyout originated years ago, and perhaps these murmurs should be taken more seriously. A business deal to this extent would allow Apple to control both the content of their music and its distribution, resulting in economic benefits of huge proportions. Since these rumors have real roots, I wonder if Apple buying MySpace will ever be in the picture. That would certainly be the most dramatic ending to this epic fight, whether or not it is particularly feasible. In the meantime, however, I cannot help but be skeptical that the MySpace Music shopping experience will be as friendly as iTunes', since each artist’s page is equipped with different graphics, colors, and designs that could make navigation difficult and overwhelming. Additionally, I anticipate that MySpace tracks will cost more than those on iTunes, which, given the thriftiness of its young consumers, would likely discourage large amounts of purchases. Yes, MySpace Music does promise some exciting and innovative features, but I will be putting my money on iTunes for the duration of this battle.