MySpace sides with Goliath

Since its 2003 debut, MySpace.com has been a vital channel of exposure for all manner of independent musicians, who can post MP3s and biographical profiles there, free of charge.

More recently, the News Corp.-owned Web site, with its 5 million band pages and 110 million monthly users, has emerged as a potential new business model for an industry still struggling to adapt to the era of digital music distribution: The just-launched My Space Music service integrates artist showcases with a download service run by partner Amazon.com.

Everyone - the big fish and little fish alike - had a reason to be excited about MySpace.

Until now, it seems.

Last week, Charles Caldas, the chief executive officer of Merlin - an organization that represents thousands of indie music labels in an increasingly complex effort to license their music in a global music market - issued an angry statement that accused MySpace of botching a deal with indies and kowtowing to the interests of the four remaining major music labels.

At this point, the social networking site’s offer of a 40-percent equity stake in MySpace Music is exclusive to the majors - meaning that big music would enjoy a significant share of general revenues produced, in part, by music supplied by indie labels.

“You have this situation where the major labels are our competitors on a day-to-day basis,” Mr. Caldas says via phone from London.

If they participate in MySpace Music, he adds, “our competitors will also be our retailers.”

MySpace, based in Beverly Hills, Calif., did not return repeated calls for comment.

Its CEO, Chris DeWolfe, however, told Wired magazine in April: “We’re open to extending our equity deals to the right partners, but at a certain point, you can’t extend equity to everyone.”

MySpace already provides a “free promotional platform” to millions of bands, he said. And, as a practical matter, “we don’t really have the mechanism right now to develop an affiliate program or payout structure for millions and millions of bands.”

Indie label heads say they aren’t persuaded by Mr. DeWolfe’s statement of good will.

Bob Frank, who heads Koch Records, the largest independent label in the U.S., says of MySpace: “They’re acting like bullies.”

And Martin Mills, founder and chairman of the Beggars Group, the United Kingdom-based company that includes storied indie labels such as 4AD, Rough Trade and Matador, says MySpace is being rolled by the major labels, which are eyeing “joint ventures” such as that with MySpace Music as a means of regaining control of the channels of music distribution.

Just when it seemed like the majors had ceded their grip to nonmusic companies like Apple Computer, they pivoted into a new strategy of co-opting, where possible, those companies from within.

Story Continues →