Last.fm: Free Full-Song Streaming, For Better or Worse?

In an earlier post entitled “Digital Downloads: Who Should Profit Most?” I ventured into the blogosphere to research what other authors were saying about the digital royalties debate and left my own comments and questions for them as well. This week, I will be blogging here and abroad about a similar topic, as the digital debate never seems to sleep. Of current interest to the music industry is the press release issued last week by last.fm, a free online streaming service that has distribution deals with four major music labels as well as numerous independents, and pays the labels each time one of their tracks is streamed via the site (sample player screen pictured, right). Last week, last.fm announced that since the service began offering free access to streaming songs from its five million track music catalog in January, not only has this generated a boost in new traffic to the site, but it has also resulted in existing users buying sixty-six percent more albums and individual tracks than they did before the free on-demand service debuted. Currently, bloggers are debating whether or not such a service has the power to change music listening trends and revive dying CD sales. As a new user of streaming sites such as last.fm and the hype machine and therefore involved in these trends, I was very attracted to this topic and chose to offer my own thoughts on two prominent blogs. The first post I came across, “What last.fm’s sales increase means to me” is written by Glenn Peoples, founder and editor of the Coolfer music industry blog. While last.fm solely credits its acquisition of free music streaming as the cause of new CD sales revenue, Peoples’ stance is that it is not just free music that has the power to increase sales, but rather the type of music service that is offered. The second post I found is entitled “Why last.fm’s free music won’t replace your music collection.” Written by Nate Anderson of Ars Technica, Anderson takes the position that despite the high quality and amount of free music, we should be skeptical of such a service and aware of its limitations, examining it from a larger, more cautious perspective. He believes that an ad-supported service such as last.fm always has financial interests at heart before concern for the user experience, and thus it will not be possible for last.fm to replace our music collections anytime soon, although it may be an enjoyable supplement if you can face the ads. In addition to posting my comments directly on the authors’ respective blog entries, I have also displayed these comments below.

“What last.fm’s sales increase means to me”
Comment:
Thank you for your careful analysis of the press release issued recently by last.fm. The release states that last.fm prides itself on helping “drive the discovery” of its users through its unique recommendation engine. However, I too have to wonder whether the ubiquitous statistic of a 119% sales increase is really all that dramatic of a figure. If the base sales amount was small, then a doubling of profits might not be as much as last.fm is proudly advertising, and may not be entirely attributable to the new free streaming as the company claims. On that note, I agree that a better portion of this number likely comes from users buying songs they already know and like after listening to them on the new on-demand service. Therefore, it is important for last.fm to accurately note the role that the type of service plays in relation to the sales, which you believe superior to the offering of free music alone. As you say, you have to “dig” into the press release to see last.fm co-founder Martin Siskel make this connection. However, either I disagree with your statement that listeners will “take a sure thing over online radio’s crap shoot any day,” or I simply represent one of the few “early-adopter types” in that “small slice of the bell curve” (pictured, below left). As someone who just recently began listening to last.fm and blog compilation sites such as The Hype Machine, I cannot stop tuning in, and these are almost entirely new artists, songs, and music genres for me. Surprisingly, I have discovered a few new artists that I enjoy by listening to random playlists selected by algorithms. In that case, it seems that streaming services like last.fm actually have helped drive my discovery of new music. Of course, if I am merely in the minority here with my insatiable desire for new and less-mainstream music, I do understand how the majority of users would prefer on-demand streaming to non-interactive services. For the less adventurous, an on-demand service obviously delivers the songs and artists the listener will definitely enjoy and be more likely to purchase, which certainly may explain the sales increase. All in all, the connection between on-demand streaming and increased CD and download sales is an interesting one, and I look forward to seeing how it continues to play out.


“Why last.fm’s free music won’t replace your music collection”
Comment:
First of all, I would like to thank you for your well-researched and unbiased summary of last.fm’s advantages and drawbacks. Recently having read that last.fm’s sales through Amazon have increased 119% since the beginning of its free on-demand streaming, I wanted to see what the service was all about. As a brand new user, I agree with much of your account. Yes, the service works and is very responsive, but the ad-supported business model is frustrating. The whole point of such a service is for the user to have the ability to listen to their favorite artists and songs (as well as discover new ones) unlimited, for free; the three-time listening limit per track is a turn-off for me when I can listen to other full songs at sites such as The Hype Machine and Artist Direct without boundaries or advertisements. Artist Direct, for example, offers about two hundred free songs each week. If you are willing to take the time to individually download each one and organize them on your computer, your music collection really will increase in numbers pretty steadily and quickly. Granted, these free songs encompass all genres from heavy metal to Icelandic to international dance, so only a small portion will be likeable to the average user, and sorting through each takes a long time. However, the fact that last.fm does not allow free downloads and only partners with Amazon as opposed to iTunes severely limits its chances of making significant contributions to my music library. While you describe the possibility that the service may become the next “Music YouTube,” providing a legal way for friends to link up full songs for others to hear, ultimately I think that most listeners are primarily looking for a way to transport their music to external devices (and therefore permanently add to their music collection). If last.fm started a partnership with iTunes, I would be more likely to purchase songs that I first heard there. In the meantime, however, it certainly will not be replacing my music collection any time soon.

MySpace versus iTunes: The Battle Begins

In a previous post, I explored the up-and-coming music platforms on two social networking sites, MySpace and Facebook, and the implications each will have on today’s music culture. Presently, I would like to return to this topic in light of MySpace’s timely new developments and address the challenges that Apple’s iTunes music store will accordingly face. Since my initial post two weeks ago, MySpace Music (see logo, below left) has already made major changes to its site, signing a joint deal with three major record labels including Sony BMG, Warner Music Group, and Universal Music Group. Given the chance to share in MySpace Music’s profits, Universal unsurprisingly decided to quietly drop its 2006 copyright infringement lawsuit against MySpace, one of the chief reasons why the site did not debut when MySpace announced its plans to enter the music business two years ago. No money is expected to trade hands up front in this new business venture; rather, the labels are offering content rights to MySpace in exchange for minority equity rights in the service, expected to launch later this year. Additionally, the labels hope to benefit from the advertising revenues that will largely fund the platform. More than anything else, however, the record companies seek to expand the number of alternatives to the iTunes music store in their favor. As negotiations with the record companies continue in full force, it seems that nothing can stop MySpace Music from entering the industry and setting new standards for music accessibility and consumption.

Apple may beg to differ, however. These talks are occurring at a momentous time in the industry, because as of this past week, iTunes has finally overtaken Wal-Mart as the number one music retailer in the nation, totaling nineteen percent of all music purchases. With paid downloads accounting for thirty (and rising) percent of all sales and iTunes serving as the primary venue for these transactions, some, such as Forrester Research analyst James McQuivey, argue that MySpace Music will not be an impending threat to Apple because of iTunes’ “connection to an amazingly popular device [the iPod]”. Not to mention that iTunes reaches a wide international audience, whereas MySpace Music is currently only available within the United States. But what will happen when users can receive DRM-free downloads from MySpace instead, all the while in a more interactive environment that offers fans a personal connection to their favorite artists? Blogger Jacqui Cheng of Ars Technica believes that the new service “could give giants like iTunes and Amazon MP3 a run for their money.” With thirty million users who identify themselves as active members of the music community and five million artist pages that offer interactivity in the form of messages, feeds, and polls between the artist and the fan, MySpace Music might just steal iTunes' thunder. And iTunes is not at all oblivious to this possibility.

In fact, Apple representatives pulled what may look like a desperate stunt at last night's Family Force 5 concert, passing out $30 iTunes music gift cards to fans as they walked out the door. Last100's blogger Daniel Langendorf, who attended this show, made an observation of considerable note: the performers themselves announced to fans, “check out this song when you go home on MySpace!” This new trend on behalf of performing artists to recognize and promote their MySpace pages, combined with Apple's gift card giveaway, serves as a clear indicator that Apple and iTunes are not viewing the upcoming service without apprehension. Additionally, whispers are circulating that Apple has proposed a new "all-you-can-eat" music download package that would allow users unlimited iTunes downloads with their purchase of an iPod (see below right-hand iTunes + iPod ad graphic). While the price of iPod hardware would increase somewhat, Apple would pay a certain premium to the labels for the songs, such that no subscription fee would be necessary. As long as heavy music buyers switch to the iPod plus music bundle and some infrequent buyers jump on board as well, the plan would be profitable for Apple (if interested in the number crunching, see this recent article from Coolfer). Ideally, users would be satisfied, and if this service were enacted effectively it would certainly reduce MySpace's threat to Apple. Interestingly, though, the mp3 player manufacturer Zune has been offering a similar option with its devices since 2006, such that Apple's download package is not an entirely new idea. However, despite technology that is closely comparable to the iPod, Zune's plan never really caught on among the greater public, perhaps due to its smaller reach and lack of brand name power. Already excelling free of these limitations, I expect that Apple's proposal will experience far greater success.

On the subject of Apple's radical yet captivating potential counter-moves to MySpace Music, consider the following: as an April Fool’s joke, news of Apple purchasing Universal flooded the inboxes of industry officials. The hoax, which announced that all Universal tracks would be available through iTunes for a mere fifteen cents, temporarily convinced even Wired.com blogger Eliot Van Buskirk, who admitted that although somewhat outrageous, rumors of such an acquisition have been spreading for years. Despite the fact that the April Fool’s revival solely aimed to deliver humorous shock value, talks of this Apple-Universal buyout originated years ago, and perhaps these murmurs should be taken more seriously. A business deal to this extent would allow Apple to control both the content of their music and its distribution, resulting in economic benefits of huge proportions. Since these rumors have real roots, I wonder if Apple buying MySpace will ever be in the picture. That would certainly be the most dramatic ending to this epic fight, whether or not it is particularly feasible. In the meantime, however, I cannot help but be skeptical that the MySpace Music shopping experience will be as friendly as iTunes', since each artist’s page is equipped with different graphics, colors, and designs that could make navigation difficult and overwhelming. Additionally, I anticipate that MySpace tracks will cost more than those on iTunes, which, given the thriftiness of its young consumers, would likely discourage large amounts of purchases. Yes, MySpace Music does promise some exciting and innovative features, but I will be putting my money on iTunes for the duration of this battle.