Record companies, MySpace hook up

MySpace, News Corp.'s social-networking Web site, will sell music and concert tickets to prop up revenue as user growth lags behind its rivals.

MySpace Music will be co-owned with the world's largest record companies. Terms of the agreement with Universal, Sony BMG and Warner weren't disclosed.

MySpace is taking on Apple's iTunes, Wal-Mart and Amazon.com in the music-downloading market as its lead over social-networking competitor Facebook shrinks, according to researcher ComScore.

Google in January reported disappointing revenue from advertisements it sells on MySpace. The new site may reduce record companies' reliance on Apple for online sales.

"It's good news to both the industry and the customers that there's some potentially viable competition to the iTunes store," said David Card, an analyst with JupiterResearch in New York. "The question is, can they turn on enough revenue models to keep all the partner companies happy?"

MySpace will share revenue from sponsorships, sales of concert tickets, cellphone ringtones, music and merchandise with record labels and musicians, Chief Executive Officer Chris DeWolfe said in a conference call. The music site has 30 million users and more than 5 million profile pages of artists, he said.

"If you think about MTV and when Apple launched iTunes, this has the same potential," said Amit Kapur, MySpace's chief operating officer. "Music is such a strong cultural vehicle, it makes it so incredibly appealing to brands. It's hot. It's sexy."

By selling concert tickets, MySpace also pits itself against IAC/InterActiveCorp's Ticketmaster, the world's top ticket broker, and Live Nation, the biggest concert promoter.

Live Nation is expanding into ticket sales and has struck agreements with U2 for tours and merchandise and with Madonna for albums as well. The New York Times reported Thursday that a deal with rapper Jay-Z, whose real name is Shawn Carter, is close.

New features will be introduced in the next three to four months in the U.S., and overseas later, DeWolfe said. Some of the songs will be downloadable to iPods and prices will be "very competitive."

MySpace's January user growth of 15 percent from a year earlier, to 109.3 million, trailed Facebook's fourfold increase to 100.7 million, according to ComScore.

Both companies seek out advertisers eager to target Web users based on their age, location and hobbies. Ad spending on social networks in the U.S. may jump to $2.7 billion by 2011, according to EMarketer.

Google is seeking to improve its advertising effectiveness on MySpace, after agreeing in 2006 to pay the site at least $900 million over three years.

Record companies are seeking to increase their sales from downloads and mobile ringtones as compact-disc revenue declines.

Through March 23, sales of CD albums had fallen 16 percent this year, while sales of digital albums rose 36 percent, according to Nielsen SoundScan. CDs account for about 85 percent of overall album sales.