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Comment News Corp's MySpace may just have found a way around the piracy laws that dog the sale of online music, and may, as a result, throw up the most likely candidate to challenge iTunes.

The answer seems to lie in the fact that both the bands and the buyers are all members of the same social networking service.

What MySpace has done is made it possible within its software for MySpace users to buy and sell from each other, in a single move making it possible for what some believe are as many as three million music bands, to sell to the entire 106m plus MySpace community.

These bands are in almost every case unsigned to any music label, and MySpace appears to be ready to make money from them without ever having them sign a recording contract.

"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."

We think the idea is to sell the music without any content protection, and let the bands decide how much each track or album will sell for. MP3 files will play on all MP3 players and unprotected on both the Apple iPod and the Sony PlayStation Portable.

However, given that Snocap, which has various copy protection technologies that it can work with, will manage the ecommerce service to validate transactions, collect funds and issue the digital licenses, there may be some level of watermarking or other protection involved, to limit piracy.

One source says eBay's PayPal online payment system is going to be used to actually commit the financial transactions.

It might have been more natural for MySpace to go with Google's new online payment system, given that Google has just cut a deal managing search advertising for MySpace, to the tune of a $900m a year, minimum guarantee.

The MySpace "distribution fee" for each song has yet to be fixed, but it is promised to be small.

MySpace said it would be "enhancing and customising" its online music store as the service evolves, aiming to eventually offer copyright-protected songs from major record companies with EMI being the obvious first candidate since it is currently talking to virtually everyone in online music sales.

At Faultline we take this far more seriously than, say, the recent launch of the SpiralFrog free ad supported music download service or the Microsoft launch of the Toshiba built Zune iPod killer, with a Microsoft online music service.

A browse through discussion boards suggests that many MySpace users love the idea that they can buy from MySpace,and already have many favourite bands on it.

Back in June MySpace ran a competition to find the most popular unsigned band and signed it up with record company Wind-up Records, which ended up singing Texan punk band Rockett Queen, giving it the chance to write the theme music to a new Fox film John Tucker must die, so MySpace already has a pretty good idea of whether or not there is sufficient interest in MySpace to drive music sales.

At that time over 6,500 unsigned bands submitted songs for consideration and if Wind-up Records signs up more of them, we could have a new music behemoth in just a year or so.

Copyright © 2006, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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