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Last.fm looks to cut down on licensing costs by focusing entirely on scrobbling
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.
(Image source: (neilperkin.typepad.com)
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Last.fm is a social networking company which revolves around its music recommendation engine. Recommendations are made by comparing user data to the rest of the Last.fm user community. This community gives more potential to grow into media other than music. This is most likely a reason why media giant, CBS, acquired Last.fm for $280 million in May of 2007.Last.fm grew from very modest funding compared to its competitors Pandora, ilike, MyStrands and others.
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Pandora, the leading internet radio service, gives people music they love
anytime, anywhere, through a wide variety of connected devices: laptop and
desktop computers, smartphones, connected BluRay players, connected TVs,
etc. Personalized stations launch instantly with the input of a single “seed” –
a favorite artist, song or genre. The Music Genome Project®, a deeply
detailed, hand-built musical taxonomy, powers the personalization or
Pandora. Using this musicological “DNA” and constant listener feedback
Pandora crafts personalized stations from the more than 800,000 songs that
have been analyzed since the project began in January 2000.
More than 75 million people throughout the United States listen to
personalized radio stations for free on Pandora through their PCs, mobile
phones and devices such as the iPad, and connected in-house devices
ranging from TVs to set-top boxes to Blu-Ray players. Mobile technology has
been a significant factor in the growth and popularity of Pandora, starting
with the introduction of the Apple app store for the iPhone in the summer of
2008. Pandora instantly became one of the most top downloaded apps and
today, according to Nielsen, is one of the top five most popular apps across
all smartphone platforms.
Pandora is free, simple and, thanks to connectivity, available everywhere
consumers are – at the office, at home, in the car and all points in between.
In 2009 the Company announced that Pandora would be incorporated into
the dashboard in Ford cars via SYNC technology; GM has already followed in
announcing plans to integrate Pandora into its vehicles and Mercedes-Benz
introduced their Media Interface Plus device that works with the
free Pandora iPhone app to provide direct control of Pandora from in-dash
stereo controls. This was all great news for the millions of Pandora listeners
who had been plugging their smartphones into car dashboards to listen to
personalized stations while driving. More than 50 percent of radio listening
happens in the car, making it a crucial arena for Pandora.
Today tens of millions of people have a deeply personal connection with
Pandora based on the delight of personalized radio listening and discovery.
These highly engaged listeners reinforce the value Pandora provides to: 1)
musicians, who have found in Pandora a level playing field on which their
music has a greater chance of being played than ever before; 2) advertisers,
who benefit from the multi-platform reach of Pandora, as well as its best
practices in targeting consumers for specific campaigns; 3) the music
industry, which has found in Pandora a highly effective distribution channel;
and 4) automobile and consumer electronics device manufacturers, who have
noted that incorporating Pandora into their product makes it more valuable
Pandora continues to focus on its business in the United States. The radio
arena has never been hotter, thanks to technology that enables radio to be
personalized to the individual and more accessible than ever before. Right
now millions of people listen to Pandora in the United States and we hope
someday to bring Pandora to billions of people around the world.
• 2000 – Tim Westergren’s Music Genome Project begins.
• 2005 – Pandora launches on the web.
• 2008 – Pandora app becomes one of the most consistently downloaded
apps in the Apple store.
• 2009 – Ford announces Pandora will be incorporated into car
dashboard. Alpine and Pioneer begin selling aftermarket radios that
connect to consumers’ iPhones and puts the control and command of
Pandora into the car dashboard.
• 2010 – Pandora is present on more than 200 connected consumer
electronics devices ranging from smartphones to TVs to set-top boxes
to Blu-ray players and is able to stream visual, audio, and interactive
advertising to computers, smartphones, iPads, and in-home connected