Digital Top Stories

New MySpace business plan possibly too ambitious

By | Published on Tuesday 20 November 2012

MySpace

While a demo of the all-new MySpace to tech and media journalists last week garnered generally good reviews, business commentators have been more cautious when responding to a leaked stack of slides presented by the social networking platform’s owners Specific Media to potential investors.

Specific, which acquired MySpace last year, is looking to raise $50 million in investment to help market the relaunch, renew licensing deals with the major music companies, and cover some operating costs.

The MySpace investor pitch summarises Specific Media’s web advertising credentials, which are relatively strong, and which are crucial given that the all-new version of the one-time uber-social-network will still rely heavily on ad revenues, despite plans down the line to plug in artist-based merchandise and ticketing services. But while those credentials are undeniable, some have raised concerns about Specific’s ambitious projections regarding future growth in user-base, revenues and especially profits.

MySpace wishes to distance itself from newer more successful social media platforms by being about music, while at the same time distancing itself from other music platforms by being more social. But while elements of the slick new MySpace platform look good, Specific is operating in a very competitive market on both the social and music side of things. And even if the new MySpace is successful in terms of attracting users, with streaming music still very much part of the mix, that doesn’t necessarily mean an immediately profitable business, given the costs involved with providing music streams.

On one slide in Specific’s presentation, the MySpace owner boasts about its advantages in the music space over other streaming music platforms. It also notes that its core music offer pays the lower ‘interactive-radio’ royalty rate to rights owners akin to Pandora, rather than the higher ‘on-demand’ royalty rate paid out by Spotify.

Though that ignores the fact that Pandora is constantly moaning that its rates are too high, that neither Pandora nor Spotify have managed to make an ad-funded service on its own add up, and that MySpace is due to renew its licensing deals with the majors, which were originally secured by giving the record companies an equity stake in a spin-off MySpace Music business, and it’s not entirely clear if rates moving forward have been completely agreed.

Specific also boasts that, unlike its competitors, its music library includes all the tracks uploaded by unsigned bands over the years, on which it doesn’t pay any royalties, claiming that over 50% of listening on the current MySpace is of these royalty-free tracks.

Which it may well be, though that’s mainly because the MySpace Music streaming service never really took off in its own right (it being technically inferior to so many newer competitors), and therefore the music players on the profiles of individual artists have always remained a key part of the MySpace mix. But if MySpace really took off as a music destination site, and took music listening away from Spotify, Pandora and YouTube, the signed-to-unsigned ratio would almost certainly tip significantly in the former’s direction.

Plus the value of MySpace’s unsigned catalogue is falling all the time, given that many bands haven’t been using the site for sometime now, meaning a lot of the unsigned music on there dates from a few years back, and a lot of it will be from now defunct bands (it would also be interesting to know how many of the bands featured in MySpace’s unsigned catalogue have since signed with a label, meaning that the previously uploaded music still being provided for free should technically have been removed).

Of course if MySpace can again become the site where all bands build a virtual home, and unsigned acts again start uploading new material, that unsigned catalogue may be reinvigorated. And a quick browse of SoundCloud will show you that new bands are still willing to give away their content, certainly as a stream, in order to build audience. Though given that all the services which now enable unsigned bands to get their music into Spotify et al which do pay a royalty (even if it’s tiny), perhaps new bands will become less willing to make their songs available totally for free. Especially if MySpace is basically going around telling investors “we’ll make you rich by exploiting unsigned artists”.

All that said, the new look MySpace remains a surprisingly interesting venture, given that eighteen months ago many people had written off the digital set-up completely, predicting its eventual ascendancy to the big Geocities neighbourhood in the sky. But while the new MySpace technology feels like an ambitious reboot that might just work, the new MySpace business plan feels like an ambitious venture that might just fail.



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