MySpace, Facebook, Google, Music Labels Bow to Inevitable

(MoneyWatch)  It's difficult to look at what seems to be a big opportunity -- selling music over the web at the big social networking and search sites -- and see anything other than success. And big is what comes to mind when MySpace, Facebook, and Google all work with major music labels to let consumers purchase music where they're most accustomed to be online, and not having to go to a store (read that as Apple or Amazon) to get what they want. But these are not chances grasped with foresight. They are the worried grasping of companies that, for differing reasons, all have their backs against the wall.

A big statement, I know, but look at history for a moment. People have been buying music online for ... how many years? Long enough that Apple could establish a lyrical hegemony. All the companies above, including the labels themselves, could have entered this field far sooner. But they didn't. Why? I think it comes down to being too comfortable with a way of working -- advertising, in each case -- and not wanting to face the reality of needing to move away from that model.

Thanks to the disastrous lurching of the advertising industry in the face of the general economy over the last year, that strategy has gone the way of the dodo. Now everyone wants to carve out other ways of making money, which generally means either selling data on customers, which they already do (and for which there are many other sources, reducing the perceived value), or getting a piece of some transaction. Google has clearly been on this path, and both Facebook and MySpace are feeling their limitations. In fact, MySpace CEO Owen van Natta admitted that his company had given up trying to beat Facebook.

The music labels are completely desperate, given how CD sales have been hammered for years. Availability of digital single tracks reduces the need to buy an entire CD for the one or two songs that might satisfy many. That means people spend less money overall, so less money for the labels. As if this should have been a surprise to anyone. The other facet of this gem of a situation that should also be shining enough to be obvious is that in some industries, distribution becomes a zero sum game. For example, up to a point a Dunkin Donuts or Starbucks will sell more cups of coffee if it has more locations, because it reduces the inconvenience factor for consumers, who might purchase from you if you don't make them go out of their way. But that owes to physical travel. Online? Just how inconvenient is it for people already accustomed to purchasing from the iTunes store to continue buying there? Yes, there will probably be some increase, and having a hub for popular music videos might help MySpace, though YouTube is also pretty convenient. And Facebook's emphasis on sending music to friends, either on a stream or as a file, also holds some promise, though I suspect far less than management thinks. People share music links as it is, and probably files, and I wonder if the uptake isn't going to be relatively disappointing.

These moves aren't genius or bold. They're late, they're minor, and they're unlikely to make much difference in the industry. All they will do is placate management and provide an excuse for the question, "Daddy, when the face of media and technology changed, what did you do?"

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