Warner Music And Last.FM Part Company: Brief Analysis

Warner Music And Last.FM Part Company: Brief Analysis Friday saw the news that Warner Music and Last.FM had ended their arrangement to have Warner’s music play on the free on-demand music streaming service that Last.FM runs.

It’s unclear if Warner’s dropped Last.FM or if Warner’s were themselves dropped.

Either way, with letting this deal lapse, Warner’s are putting themselves in a dangerous position, one where the music of their artists is in danger of not being heard. You couldn’t imagine them doing the same in an offline equivalent - pulling their music from a popular radio station.

Is online streamed music a business?
Michael Robertson, famed for his mp3.com background, claimed on the Pho mailing list that there’s no way that online streaming radio companies can make money …

Every online streaming radio license in effect today will bankrupt the online company. This goes for imeem, last.fm, deezer, pandora, etc. You cannot generate enough advertising dollars to pay the required royalties. Anyone who says different is wrong. As long as these companies can live off of VC money or postpone paying the bills they can continue to operate with the status quo. But the clock is ticking. When they run out of venture capital money and/or get adult supervision they will have to make radical changes.

Robertson, you would assume, has quite some experience with music online. If what he says is correct, many more online radio stations will be renegotiating deals … or going to the wall.

The background
There’s been speculation that Last.FM’s new owners, CBS looked at the economic model behind the service and don’t see it working financially with the current deals with music owners - hence are trying to negotiate a better deal with the labels.

Another view is that Warner’s are trying to increase their earnings - perhaps because they know that the deep pockets of CBS are now within reach. It’s been reported that Warner’s have a lot of discontent about Last.FM not launching their pay-for service.

Image: Last.fm founders : Left to right: Martin Stiksel, Felix Miller, Richard Jones