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MySpace: Does relaunch as Spotify competitor make sense for site?

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MySpace is reportedly set to re-invent itself as a music streaming rival to Spotify and Pandora next year.

The Business Insider website this week reported that the new owners of MySpace want to raise around $50 million in order to launch a music subscription service under the MySpace brand.

A leaked briefing document from Interactive Media Holdings, the private company mostly owned by the Vanderhook family that has investors including Justin Timberlake, appeared to confirm the much-rumoured change in strategy.

A screenshot of the new look MySpace
Justin Timberlake recites the poem 'Golf' at the Ryder Cup opening ceremony, September 26, 2012

© PA Images / Charles Rex Arbogast / AP















Rupert Murdoch's News Corporation sold MySpace to Interactive - then known as Specific Media - in summer 2011 for $35m, making a huge loss on the $580m it had paid for the social networking pioneer six years earlier.

Interactive relaunched MySpace later in 2011 and traffic jumped 36% by the end of the year.

However, the site is still struggling to make money and accounts show it lost more than $40m in 2012, while revenues are only expected to be $15m this year, albeit up from $9m in 2011.

The pitch materials, dated from November 16, 2012, reveal that Interactive wants to raise $50m to relaunch MySpace as a music streaming service in the vein of Spotify, Napster and Pandora.

It says that $10 million would be invested in marketing for the service, and the remaining cash would go into licensing deals with the music labels and "general working capital".

A screenshot of the new look MySpace


Interactive says in the pitch that the music subscription business for mobile would launch in the second quarter of 2013.

The company claims that MySpace has a big advantage over rivals due to the lower rates it has already agreed to pay for songs. This includes 27m tracks from unsigned artists that account for 50% of music played on the network.

Should the move materialise, then it would mark the latest twist in the story of MySpace. The service was the dominant social network at its peak in 2008, but the arrival of Facebook and Twitter soon changed its fortunes for the worse, while the disastrous News Corp acquisition further stunted growth.

After being acquired by Interactive, MySpace avoided the fruitless social networking fight against the behemoth Facebook and instead focused on music.

A screenshot of the new look MySpace


This led to its first increase in membership for some time, in February 2012, and showed that people still value the network as a place to discover new music; one of MySpace's legacy strengths.

MySpace also has one of the biggest catalogues of digital music of any provider, at more than 42m songs, compared to Spotify's 17m. This is because unsigned artists still use the network as a place to get free exposure for their music.

With more cash for licensing deals with the labels and a well designed user interface, particularly for mobile devices, the move to a music subscription service could finally put this fallen giant back among the digital media elite.

However, the digital music sector is now extremely competitive, yet to show significant profitability and filled with many major players, including Microsoft and Nokia recently joining the likes of Spotify, Deezer, We7 and Pandora.

In January this year, proposed digital music service Beyond Oblivion folded even before it was able to launch, despite raising $87m (£55.8m) from investors including Rupert Murdoch's News Corporation.

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