For even the most popular streaming services, royalties and licensing can be a killer. Just look at Pandora: in all, for the first three quarters of 2013, its total revenue was $463 million. And yet, the company is currently $37 million in the hole, all because of licensing and royalties.
The company paid over $250 million in 2012 alone, and those costs are only continuing to rise. In fact, Pandora was forced to pay out more than that in acquisition costs in the first nine months of 2013 alone.
With those kinds of costs, imagine how hard it must be for smaller services to compete. One such company, Last.fm, may have found a way around them, though.
The company announced in a blog post on Wednesday that it will be shutting down its subscription radio streaming service on April 28th. After that date, the "traditional subscriber radio will no longer work on any platform or device."
Instead of allowing users to stream songs on Last.fm directly, the company is shifting its focus to other areas, namely music discovery, recommendations and, most importantly, scrobbling. Scrobbling allows Last.fm users to listen to songs on another apps, after which the name of the song is sent to Last.fm and added to that user's music profile.
Users can use the app to build Last.fm powered playlists from the music in their device’s library and to link their iOS device to their Bluetooth supported speakers. Last.fm's partners for its Scrobbling app include Spotify, Android, and Apple, as well as hardware devices like Logitech Squeezebox and Sonos.
In addition, users will also be able to listen to their radio stations via Last.fm's YouTube-powered player, as well as through its on-demand playback feature via Spotify.
The impetus for this decision seems to reduce licensing costs. Basically, because users are using the other apps to actually stream the music, with Last.fm only building playlists and recommending songs, they no longer have to pay to maintain a catalogue.
"Over ten years, our goal has always been to allow people around the world to discover new music with as few limitations or restrictions as possible," Last.fm wrote. "However, the music landscape has changed considerably during that time and we've been forced to make some very difficult decisions surrounding our core products and services."
The decision to shut down the streaming service is not coming out of nowhere either. In January the company announced that its radio service was being cut off in every market except the United States, United Kingdom, Germany, Canada, Australia, New Zealand, Ireland and Brazil.
"Last.fm subscribers are some of the most dedicated music fans out there and we are deeply grateful for your support over the years," the company wrote.
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