(BusinessWeek) "The Record Labels' Digital Future"

Even as they cut a deal with MySpace for online music, the record labels are looking at other ways to make money online

by Catherine Holahan

[Excerpt]

On Apr. 3 the recording industry sent a clear signal about its changing attitude toward the Internet. The social networking site MySpace and three of the four major record labels unveiled MySpace Music, which will let fans listen to music online for free and buy songs for download, along with merchandise and concert tickets. Warner Music, Sony BMG, and Universal Music, the three labels that signed up for the deal, say the joint venture is an important evolution of their business model. "We think of ourselves as undergoing a very fundamental transformation from being a CD company to a multirevenue stream, multibusiness company," says Thomas Hesse, president of Sony BMG's global digital business.

Yet MySpace Music is only part of the labels' online efforts. Under pressure from plummeting CD sales, all the major record companies are experimenting with ways of making money online. Rather than just selling music, the labels are trying to make money off of advertising, promotions, and the sales of items such as concert tickets and T-shirts that they used to leave to others.
Ad-Based Model

Other new online business models involve using an artist's music to sell tickets, merchandise, or other ad-supported services. One that has become particularly popular is iLike, an ad-supported music discovery service with 23 million users, many of whom use it through social network Facebook. Owned in part by IAC's (IACI) Ticketmaster, iLike also notifies users when their favorite artists have shows in town, sending them to Ticketmaster to purchase seats or iTunes to buy music. "What's really exciting about the current moment in music history is that there is so much experimentation because it is not quite clear which business model will prevail," says Ali Partovi, iLike's CEO.