• by Catharine P. Taylor , April 9, 2008

I want to start the column this week by saying thanks to all of you who have signed up to create a Burn Alter Ego. Before I wrote my column last week, the Facebook application had roughly 60 participants, most of whom seemed to be twentysomething employees of the client, Coca-Cola. Now it's up to 292 active participants, and 82 fans-many of which appear to be fellow Social Media Insiders. I'm not in the business here to shill for Coke. I'm just glad a lot of you have decided to be part of our group-critique of the application. I'm going to write it up in the next week or two, so send me your Burn Alter Ego comments by whichever means moves you: through Facebook or to cathyptaylor@gmail.com.

So let's talk about MySpace Music for a moment. You probably at least saw the shorthand about this last week, which goes as follows: three-major-record-companies-and-News-Corp.-get-together-to-kill-Steve-Jobs.

But, per usual, that's a bit simplistic.

This isn't about an e-commerce war circa 'bout 1999, when Amazon set out to beat barnesandnoble.com in what was thought to be the latter's business. It's about viewing the revenue engine of the music business not just as a bunch of people buying songs, but as an overarching online concept that excretes money to artists and labels in a variety of forms -- and all within one mammoth site that's about not just products, but passions. MySpace Music, which is rolling out over the next few months, promises users not only the ability to share and buy music, but also to buy ringtones, overpriced concert t-shirts and tickets, and any other saleable music item they can think of. (When is that Jay-Z bobblehead doll coming out, anyway?) Much of the discretion on how individual deals will work is left to the record companies and artists.

And, of course, the venture is depending on advertising revenue just like everyone else, though MySpace won't go into detail of how much ad revenue it expects vs. revenue from other streams in the venture.

But the potential of free music in exchange for advertising is only part of what's interesting here; it's the potential to use social networking to change the way another industry makes money. While many may wring their hands over how social media will monetize itself, the hand-wringing is much more acute in the music industry. Though the record industry is better off with legal downloading options such as iTunes than without them, according to Nielsen SoundScan data for 2007, album sales -- including those in digital formats -- declined by 9.5% last year, despite a 45% increase in digital sales. ITunes and the iPod have revolutionized consumer habits, but not solved the basic economic problems of how to make the music industry viable again.

It's true that as far as music product is concerned, iTunes doesn't only sell songs and albums, but its online store model could be viewed as quaint in a time when content is as much about sharing, and sharing opinions about it, as it is about the content itself. Being able to copy MP3 files is one thing, being able to "wear" your favorite band on a MySpace page is another, and indeed, that sort of distribution -- with bells and commerce whistles it hasn't offered in the past -- is exactly what the site has in mind. MySpace Music content will reside throughout the site, on individual's profile pages, on band pages and within the music site itself in ways that accentuate revenue streams at every turn. At iTunes the biggest insight into what other consumers are doing is the list of top downloads and the list of staff recommendations, just like what you'd find at Borders. ITunes is a store, and doesn't promise to be anything different.

The question becomes ultimately, whether MySpace, in trying to solve the music industry conundrum, pleases consumers as well. For consumers who only want to buy music, there may still be no comparison between the clean, aesthetically pleasing iTunes store and its cluttered MySpace counterpart. Then again, MySpace has the chance to build enough revenue streams around music to make it free, while also tapping into the yen consumers have to be part of the content experience rather than just owning a bit of it.

In that case, aesthetics be damned. Since iTunes launched in 2003 it has added reams of digital content, but its basic premise has stayed the same. Since that time, MySpace, Facebook, YouTube and the blogging phenomenon have changed the relationship between consumers and content. Never underestimate Apple. But is it someone else's turn?