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MySpace to sell music from nearly 3 million bands

By Yinka Adegoke Fri Sep 1, 9:38 PM ET

NEW YORK (Reuters) - MySpace, the wildly popular online teen hangout, said on Friday it will make its first move into the digital music business by selling songs from nearly 3 million unsigned bands.

MySpace is the latest company to try to take on Apple Computer Inc.'s (Nasdaq:AAPL - news) iTunes Music Store, but unlike many other start-up rivals, it already boasts 106 million users, as well as the backing of parent company News Corp (NYSE:NWS - news).

"The goal is to be one of the biggest digital music stores out there," MySpace co-founder Chris DeWolfe told Reuters. "Everyone we've spoken to definitely wants an alternative to iTunes and the iPod. MySpace could be that alternative."

In the past year, MySpace.com has become the single most visited Internet address among U.S. Web users, according to Hitwise, with mainly teenagers and young adults using the site to socialize, share music and photographs.

Before the end of 2006, De Wolfe said MySpace will offer independent bands that have not signed with a record label a chance to sell their music on the site. MySpace says it has nearly 3 million bands showcasing their music.

Songs can be sold on the bands' MySpace pages and on fan pages, in non-copyright-protected MP3 digital file format, which works on most digital players including Apple's market-dominating iPod.

The bands will decide how much to charge per song after including MySpace's distribution fee, said Rusty Rueff, the chief executive of Snocap, which will manage the e-commerce service. Snocap provides digital licensing and copyright management services and was started by Napster founder Shawn Fanning. Rueff said the "small" distribution fee was not yet fixed.

BOOMING SECTOR

DeWolfe said MySpace would be "enhancing and customizing" its online music store as the service evolves, aiming to eventually offer copyright-protected songs from major record companies.

"I don't think the record companies are going to be interested in distributing music without copy protection anytime soon," said David Card, analyst at Jupiter Research.

Though DeWolfe would not give any details of discussions with record companies, an industry source close to the matter said EMI Group (EMI.L) has had discussions with MySpace. EMI declined comment.

EMI, Vivendi's (VIV.PA) Universal Music Group, Warner Music Group (NYSE:WMG - news) and Sony BMG own around 75 percent of mainstream popular music. Most of this music is only available on MySpace for live streaming as a promotional tool.

Digital music is the fastest-growing sector of the record industry but the market is dominated by iTunes, which has more than 70 percent of U.S. sales, according to NPD Research. iTunes is only fully compatible with the iPod.

The market has been abuzz with news of new entrants in recent weeks. Privately held SpiralFrog plans to launch a free music download service supported by advertising before the end of the year, and has reached a deal with Universal Music.

Microsoft Corp. (Nasdaq:MSFT - news) is planning to launch an iPod rival called the Zune, which will be supported by an integrated music download store similar to iTunes.

MySpace said it is working with eBay Inc.'s (Nasdaq:EBAY - news) PayPal for the site's online payment system.