Headless Story Found in Rumor-Filled Bar?

[Image Credit: New York Post]

And it certainly is that. With all four of the largest labels on board–including EMI, which signed on just yesterday, free ad-supported streaming of their catalogs, as well as an Amazon-powered digital music store that sells MP3s playable on the iPod and most other devices–MySpace will go down in history as the biggest Amazon (AMZN) affiliate ever–MySpace Music could become a powerhouse in the digital music space. And quickly, too, with 120 million global users, about two-thirds of whom already stream songs to their MySpace pages.

A big number, 120 million global users. Napster, at its February 2001 peak, had just 26.4 million users worldwide, to whom it promised free music. And look what it did to the industry.

“When Napster went and set the content free, it was this incredible music experience for users, but it was illegitimate and it didn’t have a business model backing it,” MySpace COO Amit Kapur told Wired.com. “That also wasn’t designed to win … how do we create an experience that is designed to win? How do we align the interests of every constituent involved in this process? And that is what we believe we’ve done.”

Could be. Clearly, the venture is a noteworthy step for the music industry, whose failure to embrace digital distribution early on has cost it dearly. And it’s one that could pay off. “MySpace has the audience and environment to enable the music industry to get to the next digital level,” Forrester (FORR) analyst James McQuivey told News.com when the effort was first announced. “What iTunes offers is a good buying experience, but that’s not all people do with music. They talk about it, they share it, they try things out. Remember, this is the kind of activity that (record label) Universal Music Group was suing MySpace for previously. I think the labels said to themselves, ‘Oh, if we enable fans to have a fully immersive experience, they might spend more on music.’ MySpace can offer a place where all aspects of the music experience can be expressed. Imeem was getting close to this, but MySpace, if they don’t mess it up, should take Music 2.0.”

[Napster Chart Credit: Wikipedia]

This morning PluggedIn Media launched a new service for streaming HD-quality music videos. Backed by Overbrook Entertainment–Will “Gettin’ Jiggy Wit It” Smith’s production and management company–PluggedIn will offer some 10,000 videos from EMI (EMI.L), Vivendi (VIV.PA) and Sony BMG (SNE), along with the standard music-site fare–artist bios, users playlists and whatnot. That being the case, how does PluggedIn hope to differentiate itself from the competition? “We look at all the changes shaping online entertainment and see massive opportunity for lots of companies to appreciate and forge really viable consumer connections,” said CEO Jeff Somers. “We think what will separate us from what is out there today is an unbelievable high-quality viewing experience, matched with in-depth content and community tools.”

Perhaps. But it will also create dangerous rivalries with some powerful competitors. With its social-networking features, PluggedIn will soon find itself in direct competition with MySpace Music (NWS) as well as Hulu (GE).