At the Family Force 5 concert tonight, the lead singer of the warm-up band The Maine said to the thousands of kids in attendance, “This next song is ‘Count em one two three’, and it’s out on MySpace.”

The significance of John O’Callaghan’s statement is astonishing, especially in light of the official announcement today of the formation of MySpace Music. MySpace, the social networking site that boasts 30 million registered users, has formed a joint venture with Universal Music Group, Sony BMG, and Warner Music Group to make their entire digital music catalogs available for downloading and listening at a new site, which will be introduced later this year. (WSJ, NYT)

EMI, the fourth major label, is not taking part in MySpace Music yet but is expected to at some point. (Previous last100 post.)

MySpace Music will offer paid-for, DRM-free MP3 downloads (no details on pricing or quality), ad-supported music and video streaming, ringtones for cell phones, concert ticket sales, and merchandise. When it’s up and running, MySpace Music will be a direct competitor to iTunes, now the No. 1 music retailer in the U.S., as well as other online music stores such as AmazonMP3.

Analysts are noting that MySpace Music is a step in the right direction for music companies, but that “Apple will not be affected for the first few years because Apple’s iTunes store lives on the strength of Apple devices,” Forrester Research analyst James McQuivey told Reuters.

That may be true. For now. But do not underestimate the influence of MySpace on bands and their fans.

Here is a stat I thought I would see one day, I just wasn’t sure when. Paid downloads accounted for almost 30 percent of all music sold in January, bringing even closer the day when the sale of digital music outpaces the physical product.

Here is another stat I thought I would see, I just wasn’t sure when. Apple’s iTunes Store has surpassed Wal-Mart as the No. 1 music retailer in the U.S., according to the NPD MusicWatch Survey (via Ars Technica).

Pretty amazing, considering iTunes opened for business almost five years ago (April 18, 2003). MP3.com, Cductive, eMusic, and others, were attempting to sell digital downloads before Apple, but it was the arrival of iTunes — in conjunction with the sale of iPods to Mac and Windows users — that legitimized online music.

In our recent Year in review (2007) for digital music, we predicted that the idea of a music flat-rate or so-called music “tax” would be one model that will be pushed hard by the major record labels in 2008. The idea:

Charge the customers of ISPs, cellphone carriers or even device manufacturers a flat-rate fee as part of their data service plan or purchase, in exchange for the right to access and possibly share music from the major record labels’ catalogs. That way, downloading is decriminalized and the recording industry is guaranteed revenue.

Of all the four major labels – Universal Music, Sony BMG, Warner, and EMI – Universal, publicly at least, has been most committed to the idea. First, by touting its own Total Music plan, and then through announcing a partnership with Nokia as part of the handset maker’s “Comes With Music” offering.

Now it seems that Warner Music has been handed the flat-rate baton.

Having already secured Universal Music’s support, Nokia is hopeful that the three remaining major labels – Sony BMG, EMI and Warner, along with around ten independents – will also sign on in time for the launch of its all-you-can-eat music download service.

Announced last December at the annual Nokia World conference, “Comes With Music” will enable customers to buy a Nokia device with a year of unlimited access to “millions of tracks”, and – rather surprisingly – get to keep any downloaded tracks once the twelve month subscription period ends. The only way to then continue accessing the service, however, is to purchase a new “Comes With Music” device (see our follow-up report).

This is getting a bit embarrassing. Every few days a record label stands up and announces a new digital download scheme that will revolutionize the recording industry and save the environment.

OK, maybe not save the environment. We have Al Gore for that. But definitely the record industry. Somebody needs to save the recording industry, and it can’t always be Steve Jobs, so today it’s a dude named Rolf Schmidt-Holtz.

Schmidt-Holtz is the CEO of Sony BMG, the world’s second-largest record label behind Universal Music Group and ahead of Warner and EMI. Schmidt-Holtz told a German newspaper, Frankfurter Allgemeine Zeitung, that Sony BMG is working on a subscription service that would allow customers unlimited access to the label’s entire library for a monthly fee, roughly US$9-$12.

Best of all — besides saving baby seals — the Sony BMG plan will work on all digital music players, including the ubiquitous iPod. And maybe, just maybe, if everybody behaves and stops pirating music, customers “could keep some songs indefinitely — that they would own them even after the subscription expired,” Herr Schmidt-Holtz is quoted as saying.

There used to be a time when you could only download legal digital music from the iTunes Store and a handful of little-known indie sites. Now there seems to be legal downloading on every street corner, with the record labels cutting deals with everybody except iTunes.

The latest deal to gain legitimate steam is one between MySpace and two of the top four record labels, Sony BMG and Warner. According to a report today in the News Corp.-owned New York Post — coincidentally the owner of MySpace — the social networking site is close to signing deals with Sony and Warner as it puts together MySpace Music. The venture may be announced as early as this week, the Post notes.

“Everybody’s operating with a sense of urgency to try to close it out,” an “industry insider” told the Post.

The new MySpace Music is expected to be a mix of pay-per-download and ad-supported streaming audio and video. As the Post notes, no money is expected to change hands as the labels are “trading content rights in exchange for minority equity stakes in MySpace Music and the chance to participate in the advertising revenues that News Corp. hopes to generate from the service.”

It comes as no surprise. Apple is said to be in discussions with the major record labels to allow customers unlimited access to the entire iTunes music library in exchange for paying a premium for iPod and iPhone devices.

The Financial Times reported late today that negotiations for an “all you can eat” model — similar to Nokia’s “comes with music” deal with Universal Music Group — are underway, although it appears Apple and the labels are still a ways off for anything to happen.

According to the FT, Nokia “is understood to be offering almost $80 per handset” to music industry partners. Apple has offered only $20 per device, according to two unnamed executives.

“It’s who blinks first, and whether or not anyone does blink,” one executive said to the FT.

Exploring an alternative or an “in addition to” business model for iTunes comes as no surprise as Apple, a consumer savvy company to begin with, is clearly protecting itself against future shifts in the market and/or consumer behavior.