Trade Review: Week Thirteen (2/2)

Myspace Lost $42 Million. Here’s Why Launching A Profit-Thin MusicService Could Nail The Coffin Shut

Myspace is the latest fool amongst many companies and entrepreneurs to vie for a slice of the supposedly profitable music streaming industry. An attractive business model with little operating costs and a service that is becoming the norm for music consumers, music streaming still poses the major downside of high costs for music licenses. Despite being one of the first social media-music websites in the digital era, Myspace has lost its market value by more than sixteen folds in just seven years! News Corp first bought Myspace for $580 million in 2005 and sold it to Specific Media in 2012 for $35 million. On top of that, Myspace lost $42 million this past year alone. Furthermore, Specific Media thinks they can make a $10 million profit by 2014 (Constine)!

 Financially proven that Myspace just keeps getting worse and worse, lets breakdown the supposed music streaming endeavor Myspace wants to take on. The most popular music streaming sights like Pandora and Spotify are both losing millions of dollars for the past two years now because the advertisement revenue is not covering the lack of subscription fees to pay for the costly music licenses. Myspace does not even plan to run on a subscription fee and solely plans on advertising revenue to bring in consumers. Myspace hopes that its social network will use the music streaming service, especially since the streaming service will ac on a freemium model. However, with major companies like Spotify and Pandora both having subscriptions, advertisement revenues and also international market presence, how does Myspace plan to make more revenue than these two heavy weights, along with other music streaming services that clutter this market?

Myspace hopes that given its popularity with independent and underground musicians, Myspace will not have not pay royalties for this music, which supposedly makes up 50% of the content. However, the best point the article brings up besides the discouraging financials, Myspace was popular in 2003 with users being in the young 20s at the time. Today, these users are 30 years old. Simply put, 30 year olds are not interested in streaming unlimited music the same way a teenager and young 20 year old is today (Constine)