Can MySpace's Grand Experiment Help Save the Music Industry?

Venture Promises Deeper Relationships and Bigger Campaigns With Likes of McDonald's, State Farm

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NEW YORK ( -- MySpace's grand music experiment is launching this month -- and it'll be as much a test of how advertisers can help underwrite the music industry as it will be of the portal's most ambitious launch since, well, its own birth four years ago.
MySpace CEO Chris DeWolfe: Now is the right time for a successful launch.
MySpace CEO Chris DeWolfe: Now is the right time for a successful launch. Credit: Frank Micelotta

McDonald's, State Farm and Toyota are the first three advertisers to sign sponsorship deals around MySpace Music, a joint venture among the popular social network and major music labels that will milk many different revenue streams, including advertising and sponsorship, paid song downloads and ringtones, and concert-ticket and merchandise sales.

MySpace is positioning it as a way for brands to tap into existing marketing strategies of aligning themselves with music -- but on the massive scale that is MySpace's 35 million music fans. Don't expect traditional banner ads.

"Part of [advertisers'] brand promise is to provide new value," said Jeff Berman, president-sales and marketing at MySpace. That value could include getting digital downloads for free, an entire album download for a limited time thanks to a brand sponsor, or sponsoring something the site calls "infinite playlisting," a feature that looks similar to one offered by popular web start-up Muxtape.

Muxtape, which has been shuttered either permanently or temporarily because of a disagreement with the RIAA, allowed users to create and share customized digital mix tapes. MySpace will let users create custom playlists that can be shared across the web.

To the rescue?
It's hard to know exactly how much advertising will prop up the beleaguered music industry. Several other ad-funded music services, including ones from Napster, Qtrax and SpiralFrog, have either publicly stumbled or not been able to generate a truly scalable audience. MySpace CEO Chris DeWolfe said now is the right time, a year in which advertisers will spend $25 billion on domestic online advertising, according to eMarketer, and that MySpace has enough traffic and infrastructure to make it successful.

"We have 300 people in sales, sales support and the creative-services group that do nothing but focus on large-brand advertisers, plus 250 people in the sales-technology group," said Mr. DeWolfe. And because music labels are partners in the venture, they have a vested interest in helping create content and exclusives for the service. He declined to say how much of the venture would be supported by advertising but said "it'll be a major revenue stream."

Ed Gold, advertising director at State Farm, sees a role for advertisers to play in underwriting music.

"One would say yes, advertising can work in the same way advertising helps support TV," he said. "The broadcast model has always been to watch ads and get free programming. Maybe that's what's going to happen here in the music space." What MySpace is doing, he said, is not all that different from radio.

Extending relationships
Mr. Berman said MySpace works with about 90 of the top 100 advertisers. The MySpace Music proposition, he said, is less about attracting new advertisers than it is "about having deeper relationships with existing ones and bigger campaigns." Opening up a large area of MySpace-controlled content creates a vast landscape of inventory to sell to brand marketers.

That jibes with State Farm's strategy around advertising on social-networking, which Mr. Gold said uses very little to no user-generated content.

"This MySpace venture was very appealing, as it is one of the best opportunities we've seen that combines the elements that matter most to music fans and users," said Anja Carroll, marketing director at McDonald's USA.

No one would comment on the cost of such campaigns, but it's believed many of the MySpace Music ad deals will command seven- to eight-figure commitments.
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