MySpace reached an agreement with the major music labels last week allowing users to listen to most songs for free on the site. Here’s a brief Q&A on what the deal will mean for marketers.

What is the significance of the MySpace Music launch?

As a joint venture between the pioneering social network and the leading music companies, MySpace Music has the potential to generate significant revenues through a combination of ad-supported streams and paid downloads.

Make room, iTunes. MySpace is hoping to shake up the digital music scene. MySpace is starting with several hundred thousand songs, but expects to surpass the size of Apple’s iTunes store, which stocks 8.5 million songs. - AP

It also has the potential to drive ancillary revenue through sales of band merchandise and concert tickets and inject a desperately needed jolt of energy into the struggling digital music industry.

How does MySpace Music differ from other ad-supported music services such as imeem, Last-FM, Pandora, Spiral Frog and QTrax?

The concept remains more of a promise than a proven model. MySpace’s relationships with brands and its DNA as a music-oriented social network put it in a strong position to take ad-supported music to a new level.

The site is also a joint venture between MySpace and the major music companies. They have a clear incentive to make the concept work. By contrast, some of the other ad-supported music players received only lukewarm support from the majors, so those services had a much steeper uphill climb.

In what specific ways will ad-supported music play out on MySpace?

In its initial incarnation, the service carries integrated sponsorships from McDonald’s, Sony Pictures, State Farm and Toyota. These brands are present in various forms throughout the MySpace Music site. For example:

• McDonald’s is sponsoring the personal players that users can create and giving away downloads.
• Toyota has a running ad on the MySpace Music home page and will also sponsor personal players and give away downloads.
• Sony Pictures is promoting its feature comedy “Nick & Norah’s Infinite Playlist” by skinning all MySpace user playlists for a week with branding from the film.
• State Farm will rotate ads throughout the site.

Going forward, ads might be placed within the streaming experience to ensure that visitors are still engaged, as opposed to turning on the player and walking away from the computer. Also, the site’s massive inventory of music videos will make it a natural venue for short prerolls.

Thanks to Paul Verna, Senior Analyst, eMarketer.com