Last.fm announced last week it is to begin charging for live streaming of music content for consumers outside of the UK, US and Germany. Users outside these three countries will pay 3 euros a month to listen to Last.fm Radio, the site’s streaming music service. The company has been clear this is simply a business decision as it doesn’t cover its cost through standard advertising models outside of these 3 territories. Within the UK, US and Germany Last.fm Last.fm can cover its licensing costs through advertisement revenue using its existing sales force.
The announcement of the plans sparked a uproar in the social community with many bloggers quoted by the BBC as being against the plans.
“A word of the wise: if this charge ever comes to the UK, I’ll be ditching my subscription immediately. Right now, you’re just making Spotify look more and more attractive,” said blog poster StudleyUK.
To be clear, Last.fm have not shown any inclination to introduce a similar model in the UK and have stated they have no need to as their ad funded model works quite well, but I suppose you never know what might happen if their trialsin other countries are a success. I have to say I agree with StudleyUK, I already prefer Spotify to last.fm for Internet music streaming and there is no way I would be paying for Last.fm whilst Spotify remains free.
This is a major challenge facing all social tools on the market at the moment. As traditional ad models become a thing of the past and the number of social utilities entering the market increases, how do their owners produce a revenue stream without charging for membership? Twitter has a similar problem and has hinted they may begin charging for corporate accounts.
CPM based ad models, or anything untargeted are a no go, other than for a simple quick win, and start charging for membership and your users will be off to the nearest competitor in an heartbeat. Facebook are doing well with their flexible targeted CPC model but not all social utilities have the luxury of so much user information. All of a sudden in the complex digital world we live in, millions of users isn’t going to be the ticket to a large valuation it used to be. Smart investors are going to need more convincing on revenue models before parting with their cash.