Is MySpace Music eyeing a possible music subscription service? That’s the question posed by a recent CNET article, on the heels of a similar story from music pub Side-Line.

Both largely cite anonymous sources, though officials, including president Courtney Holt, have already confirmed on the record that they are at the very least considering other ways to monetize the ad-supported service.

The key question here is whether MySpace will replace the free streaming service with a paid only service, or simply add a paid tier atop the free tier. It seems highly unlikely that MySpace Music would eliminate the free tier altogether. MySpace Music is considered one of the more effective music discovery platforms on the Web and labels will likely want to maintain the ability to stream full songs on it in an environment that have some control over.

But to add a paid tier in conjunction with a free tier, MySpace would have to provide a compelling reason to convince consumers to pay, which could mean limiting some of the existing features of the free service. That MySpace is negotiating with the labels now on exactly what that might be is a conversation that’s been taking place all year.

The free-vs-paid question is one that’s been dogging streaming music services and labels ever since Spotify launched (outside of the U.S.) to huge customer response but limited revenue-generating prowess. Spotify’s initial proposition to convert users to a paid model was access via mobile, which by itself has not brought about the 12% conversion rates labels are looking for. MySpace Music, and MySpace proper for that matter, are eyeing mobile strategies and will likely roll something out by the fall-to-winter timeframe.

MySpace Music will be even more challenged to convert users to a paid tier on the back of a mobile service that Spotify because the service is not positioned as a music management/music library type of service, like Spotify. Again, it’s more of a music discovery service and artist information service and replicating that in a mobile environment is going to be a trickier challenge.

Another interesting way to convert users to a paid tier is by limiting how much users can stream for free, either by capping the number of songs or the amount of time they can stream. The latter has been gaining steam of late, with both Spotify and Dada Entertainment’s Play.ME service experimenting with services that limit free streaming to about 20 hours a month before sparking a paid tier.

This sounds like a compelling compromise that other on-demand music services have voiced interest in replicating. The problem is that the record labels can’t agree on a common structure. One digital music service CEO speaking on background tells Billboard that the requirements are so varied, that it’s impossible to find the middle ground. For instance, one wants a system whereby the amount of time users can stream for free gradually reduces over three months—from 20 hours, to 10 hours, to 0 hours—based on the belief that users who don’t convert to a free tier by that point never will.

These are the challenges even MySpace Music must face even as it’s partly owned by the major labels through the joint venture under which it was created.

Will there be a paid tier on MySpace Music? Almost certainly. How MySpace implements it will tell whether the service is in the midst of radical change or incremental evolution.

Questions? Comments? Let us know: @billboardbiz

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