iTunes’ digital music monopoly threatened

www.Myspace.com is already the sixth-most popular website in the world (third in the U.S.). It contains over 106 million user accounts with a reported 230,000 new ones added daily. The social networking behemoth has completely squashed its competitors (such as xanga and friendster) and now accounts for 80% of all web traffic on social websites. And while some analysts claim that myspace’s popularity is peaking and about to crash, the many hours that the 13-24 demographic is spending on the website belies that prediction.

With so much traffic and such a huge reach worldwide, there is no question that myspace is a source of large economic returns for Rupert Murdoch (who bought the myspace for 580 million USD a year ago), even though they do not report revenues.

Now Myspace is attempting to take a huge slice of profit from the music industry (heck, they might as well eat the whole pie!) by taking over online music sales. iTunes has always been the King of the internet record store, accounting for about 70% of the legal downloading market (according to USA Today). In that final 30% are the other online retailers like Wal-Mart, Napster, and Yahoo Music. Up to this point, Myspace has established itself as a primary jukebox for many internet users; hosting millions of songs from an estimated 3 million artist/band profiles. Despite the huge number of artists (many of which are not on a record label) and the millions of fans listening to their music at any given minute, Myspace is just now jumping on the obvious sales opportunity.

And now iTunes is cringing; waiting for the damage.

Last week, Myspace announced that they are going to allow their artists to sell music directly from their Myspace accounts. Myspace will give the artist complete control; allowing them to set the prices for their songs, and which songs they will sell. The format will not be protected, like Apple’s (which prohibits music from iTunes to be played on any MP3 player other than the iPod), which may result in more music piracy. Myspace thinks it’s up to the artist to decide if they want to take the risk. The website maintains that they are going to make a minimal cut from each sale, and isn’t going to do much monitoring of the content offered.

The ones most excited about this report are the independent artists who are not signed onto a record label. Having the ability to sign up for a free Myspace account and immediately beginning selling their music from there is an unprecedented opportunity. Big bands like U2 most likely won’t appreciate their music floating around in an unprotected format; but again, Myspace is just giving options, and filling a void.

The ones most upset about this are the current online music sellers; primarily: iTunes. If a song can be bought for less money on Myspace (a site where people already spend hours on at a time), and with less hassle (ie: no annoying formats), and the warehouse of music is larger (and more varied) than any other . . . who wouldn’t buy from Myspace?

Apple; the King of the hottest MP3 player on the market and maker of some of the most acclaimed computers and software out there is not used to being beat at anything. Fortunately for them, they sell enough unique items from iTunes (like TV shows, music videos, and audiobooks) that their business will not be completely usurped. Their hold on digital music sales, though, will definitely take a substantial hit, when this new service from Myspace is completed and goes public—later this year.

The battle for the online music industry will be interesting to watch, and no-doubt good for the consumer, as hot competition drives the individual prices of songs down. I’m looking forward to it!