Myspace Pins User Gain on Music Player…But How?

By Erin Griffith , written on February 13, 2012

From The News Desk

MySpace added one million users this month, a pleasantly surprising development for new owners Specific Media and CEO Tim Vanderhook. The social network, which seemed doomed to atrophy under News Corp.'s ownership, attributes this sudden growth to MySpace's music player, a feature it added in December.

The strangest thing about the sign-ups being a result of its music player is the fact that a MySpace account is not required to stream. MySpace's free streaming service has managed to succeed as a branding tool. It also helps that a few of its features, such as creating a playlist are only available to users.

The service offers streaming stations and on-demand playing of its 42 million songs for free, which immediately makes me curious as to how it's supporting the licensing fees that are crippling streaming peers like Pandora. Then it occurred to me--MySpace's music player is culling most of its music from its artists MySpace pages. Artists upload their songs onto their pages for streaming free of charge in the same way a non-Vevo artist might post a video to YouTube. (I say non-Vevo because frankly I'm not privy to how that arrangement between the labels, platform and artists works.)

At one point it was essential for all new artists to have a presence on MySpace, and that was an important home to their new releases. While many artists have abandoned MySpace for Soundcloud or Band Camp, most large and especially most international ones still have a page where their biggest songs can be streamed. Lady Gaga's three latest singles, for example, are available via her page.

The genius of MySpace's music player is that it's merely taking those songs and making them available all in one place instead of on each artist's individual page. Listeners can make playlists, get recommendations, search for songs, and yes, share on Facebook.

MySpace has to pay for some rights through agreements with the labels in the same way that Pandora or Spotify does does. Led Zeppelin presumably didn't upload Stairway to Heaven to its MySpace profile. Still, MySpace's 42 million available tracks are impressive considering Spotify and MOG have around 15 million songs and Pandora has under a million. The company says 30 million of those songs are from unsigned, independent artists, meaning they've given the platform free access to stream in hopes of discovery. That's more than one indie song per user, of which it has around 25 million (less than half of what it had in 2010).

In a counter-intuitive move, the player isn't bothering with the audio ad game--one Pandora and Spotify face an uphill battle to win--but instead is offsetting costs entirely on display ads. You could argue that display ads have less engagement when users are listening but not looking, but at least MySpace is going after an ad market that has large allocations from willing buyers, evidenced by its launch with sponsors like McDonald's and Toyota on board. Display commands over $30 billion in ad spending per year; online audio is languishing in the $800 million range as inventory explodes.

Music is an important part of the site's future, as evidenced the addition of Justin Timberlake as an investor, a partnership with Billboard for Advertising Week last year, and also, well, the company's saying so. MySpace isn't even trying to compete with Facebook anymore, considering MySpace's music player offers a Facebook connect button to share your listening activity with friends on the competing network. The next step is video entertainment.