The New York Times writes this morning:

“CBS to Make Internet Music Unit More Like Radio:

“CBS said Wednesday that it would expand its Internet music service, Last.fm, to allow users to listen to any song on their computers whenever they wanted, up to three times.

“*The move is expected to give a lift to the idea that music through the Internet can be similar
to radio — free and supported by advertising — yet give users a choice of what they want to listen to.

“Until now, Last.fm has offered what is known as Internet radio. Users could listen to a series of songs selected by the service on the basis of their musical tastes, but they could not choose individual songs. Under the new arrangement, users who visit the service’s Web site (www.last.fm) can search for and select any of 3.5 million songs to listen to on their computers through technology called streaming…”

“Music executives say they are skeptical that services like Last.fm will be a source of significant revenue. Greg Scholl, the chief executive of the Orchard, which handles digital sales for a independent record companies, said that Last.fm and other free services resemble radio, which offers promotion for music, except that the labels receive a small payment. “In the long run, nominally paid promotion is not necessarily going to support artists and labels,” he said.

“More like radio?”

Item: This is not radio! Going to a website and saying “I would like to hear ‘You Know I’m No Good’ by Amy Winehouse right now” and then being played that song is not “radio” by any stretch of the definition that I’ve ever heard.

Reasonable people can differ as to what is “radio.” The NAB and the RAB, for example, apparently don’t consider XM or Sirius to be “radio.” Some traditional broadcasters think it’s not “radio” if it doesn’t have disk jockeys (although then you have to reject Jack FM stations and 50 years of automated FM stations). Others might say it’s not “radio” unless it’s a one-to-many transmission, which would exclude personalizable Internet radio brands (even though most consumers wouldn’t).

But in every case above, there’s some element of a continuous stream of music that’s selected by someone (or, in the case of a smart recommendation engine, something) else. Influenced by the consumer? Sure. A precise sequence of songs specifically selected by the consumer? I think not.

That’s not radio — that’s an “on-demand music service.” Just like Rhapsody, except without a 25-songs-per-month limit (and with more advertising).

And it has far less value to both the average adult consumer and to record labels.

Less value to adult consumers

Where it does have value is in replacing your need to buy CDs (or, similiarly, digital downloads). Why should you buy the new Amy Winehouse album when you can listen to any track you want, any time you want, at Last.fm?

Less promotional value to labels and artists

If I select that Amy Winehouse song above from Last.fm, the promotion work was already done by someone else. Somehow, somewhere else, the demand was created — I either read a review or heard it on the radio or saw her on TV or had a friend recommend it.

I suppose you could argue that Last.fm offers a “try it before you buy it” element. Yes, maybe…

But, again, why buy it when Last.fm lets you listen to the song any time you want? (There is a “three plays maximum” limit, true; but news stories have already noted that all you need to do to get around Last.fm’s limit is know how to “delete cookies,” which isn’t hard even for the non-tech-savvy.)

And the financial dyanamics of on-demand streaming are really poor. If the label sells me Amy Winehouse’s CD, they’ll earn several dollars. But if I listen to 20 or 30 plays of the various tracks on Last.fm, as I understand the financial dynamics behind the underlying dealmaking they’ll earn maybe a dime.

Still, good for CBS!

Watch: Their $280 million investment will pay off somehow.

Read the full NYT story here.

=============

Add your comments below

Comment

1. Hi, Kurt, this is your future self (one hour later) writing in.

   I think you could be wrong in some of your opinions above, and here’s why:

   True, this is not radio, but it’s a service that’s definitely competitive in a new product category that didn’t exist in the pre-Internet world, along with, for example, Imeem and, as you noted above, Rhapsody. And it certainly could become the leader in that category.

   And there could be some promotional value here. For example, for the person listening to Amy Winehouse on-demand, the accompanying advertisement could be purchased by Universal for the new album by Feist. So the Winehouse play wouldn't be promotional for Winehouse, but it might be for Feist (if Universal would pay Last.fm for the ad).

   And perhaps you underestimate the value of the “try it before you buy it” phenomenon; if you’ve only read about Amy W., hearing a few tracks might be a valuable step toward becoming a fan and eventually an album buyer and/or concertgoer.

   One concern, though, you didn’t address above is that of the “spot load” associated with this service. The only way that an on-demand play of a song is going to bring in enough money to make labels happy with their rev-share is if there’s a signficant piece of advertising (i.e., at a reasonably high CPM) — maybe a :30 radio spot or a :20 video gateway — accompanying each play of each song.

   Can you imagine a consumer putting up with an Internet radio station that went song-spot-song-spot-song-spot-song-spot? Of course not. If advertisers embrace this model, that will be a challenge that Last.fm will need to address.

   — Kurt Hanson · Jan 24, 08:42 AM · #

2. Hi Kurt,

   Last.fm looks like a full-on version of iTunes – instead of 30 seconds, you get the whole song- and you get to hear it 3 times and then you have to buy it.
   The only difference – it’s not as user friendly or intuitive as iTunes – and that’s a HUGE issue.
   Last.fm is not radio, it’s a hobbled music store – with some great advantages (video, social networking etc.) and some serious limitations such as advertising (if it’s intrusive this will be DOA) and the one-song-at-a time crawl.
   It’s a bigger, more social Pandora but less convenient. It still requires work and engagement by the listener – and that’s not radio.
   Last.fm is just another player in the paradigm shift from broadcasting to networking- an interesting player but that’s about all.

   — john parikhal · Jan 24, 01:52 PM · #

3. No, what Last.fm is doing isn’t “radio”…it’s more like a jukebox. The only difference is that you don’t need to go into a dive with a pocket full of quarters.

   Such a scheme does provide some promotional value assuming there’s an easy way to browse through the catalog, just like perusing the listings on that old juke while you’re waiting for you hamburger. In fact, the more adventurous might be more inclined to “test drive” a track or two from an artist they’ve never heard of. More likely, though, most people will go with what they know.

   — Art Marriott · Jan 24, 02:49 PM · #

4. Last.fm, in an on-demand format, looks strikingly like an online music store. iTunes, Rhapsody, and other digital download distributors already allow you to try before you buy, so I don’t see that as much of an innovation. One of the reasons that radio has always been popular is because we don’t always know what we want to hear. The serendipity effect is a big part of radio’s charm. Accidentally stumbling upon a great new song, or one that brings back some great memories can really make a listener’s day. Having someone else select the music does not reduce a listener’s choice. Rather, it frees the listener (who ostensibly has other things to do) from the burden of having to select the music that he or she wants to listen to at the office, or in the car, or anywhere else where radio serves as background entertainment.

   — Willie T · Jan 24, 02:50 PM · #

5. Dear Kurt: could you explain me, please, why you say «The NAB and the RAB, for example, apparently don’t consider XM or Sirius to be “radio.”» (I’m a portuguese researcher on radio’s future and this subject interests me a lot); can I quote some document where this can be clear?
   Thanks

   — joao paulo meneses · Jan 26, 03:39 AM · #

6. this is a great sight to see and express your self.great music

   — kurtis scott aka curtis futch · Mar 30, 09:28 AM · #

Other blog entries
Book your TUESDAY travel to Washington, DC!
Want to experiment with a new approach to drive times?
Kurt's iPad review: Absolutely, astonishingly game-changing!
Apple iPad: No Flash, no multitasking... yet
What might the Apple tablet mean to online radio?
Missing the obvious: NBC did. Are you too?
Conan: Classiest, smartest guy in the whole NBC/ Leno imbroglio
Lesson for radio?: NBC's value today is in its cable channels
Internet radio is coming to your nightstand's clock-radio
Best RAIN Summit ever? Maybe! Thanks to everyone