You’re a big label group with a teetering stock price, and one of your biggest artists may be leaving your stable for a fat deal offered by a competitor. So what are you to do? If you’re Warner Music Group, you get into the exciting new markets offered by the social-networking world, embedding widgets into your artists’ MySpace pages so people surfing by on a whim can download a track, if they so desire. Of course, though, since you are a major music company in 2007, you don’t do this without committing at least one grave error:

Instead, social networks likely will be limited to impulse purchases — a source of incremental revenue, but hardly likely to give iTunes a run for its money.

Which brings up obstacle No. 2: the access issues associated with digital rights management (DRM). Any digital music file incompatible with the iPod will be difficult to sell, regardless of who’s selling it. At launch, the MyStore program focused on indie and unsigned artists who have no qualms about selling their music without technical protection. Earlier this month, EMI became the first major label to adopt the platform as part of its ongoing DRM-free campaign.

But the only other major label participating in the MyStore program — WMG — has insisted on using Microsoft’s WMA technology, which even Snocap’s Rueff said will hinder adoption. “Your sales will follow where your content can be played,” he said. “If it plays on an iPod, it’s got a better chance of selling. And the only way to do that is with MP3s.”

You thought the error was going to be uploading an album before its street date or something, right? It’s OK; we didn’t think that a business could be this stubborn about its refusal to make money, either.

Labels eye online social networks as retailers [Reuters]