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CBS Buys Last.fm
I just did a search on my blog for the term "last.fm". I've used that term so many times that there are 16 pages of search results and that's just for my blog posts. Clearly I've been obsessed by this service from the day I started using it in the fall of 2005.
And there are so many reasons why. First, last.fm was the first streaming audio service on the web that wasn't traditional internet radio that really grabbed me. When I first starting playing neighbor radio, I couldn't believe how good it was. The concept is simple. If you knew all your musical neighbors and could listen to a stream of music that they are listening to right now, you'd have an amazing radio station. The people who have musical tastes closest to you are in effect the DJs. I've listened to my neighbor radio at least once a week for the past 18 months and never get sick of it. When I turned it on this morning, the first song was Very Loud by the Shout Out Louds. I love that song and have never ever heard it on traditional radio.
But there's more. Last.fm was the first service that allowed me to spy on myself, to actually tell me what I was listening to. Here's the list of the artists I've listened to the most since I started using last.fm in the fall of 2005. Here's what I've been listening to this week. Data like that was never available to me (and all of you) before last.fm.
And there's the social networking that's available on last.fm. I've met new people, been turned onto new artists, and heard about shows to go see on last.fm. The filter is the music we love and that's a pretty great filter.
So I am writing all of this as a prelude to talking about the news that CBS has purchased last.fm for a reported $280mm. That's a big number but I think it will go down as a smart buy. I think streaming audio is fast becoming the best way to listen to music over the internet. A year ago, file based music (meaning iTunes) was at least 2/3 of my listening activity. Today, it's about 1/3 and going down. I use the following streaming audio services for the majority of my listening; rhapsody, last.fm, hypemachine, blogs, and streampad. I know that I am out there on the edge and that most people still play mp3s on their iPods and laptops.
But I bet that's going to change over time. Because all the music you want to listen is available for streaming over the net. You just have to find it. And last.fm helps you find it with services like neighbor radio and similar artist radio. Radio can be monetized whereas files are free, at least to most of the youth generation. And that's just not going to change.
We've already made one bet on this trend with our investment (with CBS coincidentally) in TargetSpot. TargetSpot was built to monetize streaming audio, meaning traditional radio streamed over the Internet and new forms of radio like last.fm and the others I mentioned.
That's where the $280 million purchase price comes in. That's a bet that more and more people will start discovering and listening to music over the Internet. And it's a bet that those page views and streams can be monetized. I think they can and they will. So I think it's a smart bet that will take some time to pay off. But like MySpace, this buy may look very cheap in a couple years.
I'll finish with the playlist that I heard on Neighbor Radio while I was writing this post:
Very Loud - Shout Out Louds:
The Boy With The Thorn In His Side - The Smiths
Looking At The World From The Bottom Of A Well - Mike Doughty
A Shot In The Arm - Wilco
You can't get that on traditional radio. I can't even do that well programming my own iPod. I love last.fm and I am really happy that it found a great home at CBS.
Comments (14) | Posted May 30, 2007 in Venture Capital and Technology
Comments
It seems to me that the music industry has to embarce this business model to survive. I am a avid sonus/rhapsody fan in my house and see myself spending the $10/month for the rest of my life. It may not always be with rhapsody, it could be replaced or augmented with something better in the future. The ability to listen to anything, anytime (and one day anywhere) is incredibly valuable to me. My subscription dollars must be of huge value for the companies providing the service over producing "hits".
This model is also good for artists, assuming they can monetize it, becuase its a long-tail model. Record companies will be able to support a wider net of artists, rather than throw tremendous dollars to support to only what the deem to be smash hits. More music, more choice, more consistent revenue streams. Its a win-win-win.
Posted by: jonathanm | May 30, 2007 9:12:57 AM
Fred,
It seems like you would probably be the VC with the most number of hits in your portfolio. You may not have the highest return on your fund when compared to the best funds (E.g. because you didn't invest in Youtube or Facebook) but I think you will have the most number of companies succeed as a percentage of total companies invested when compared to other funds.
First FeedBurner, then Tacoda (with all the buying in the online ad space its almost a done deal :)) and now TargetSpot is another great move.
CBS invested in TargetSpot and a month later it buys probably the largest piece of streaming radio inventory to put TargetSpot's ads in it. Fantastic.
So, just like the WallStrip's sale to CBS, did you make all this happen as well :)?
Nik
P.S- Fred paid me through Paypercomment to write such a glowing note.
Posted by: Nik | May 30, 2007 10:14:32 AM
No caveats around MSM ownership? I love last.fm, but the two reasons I don't listen to broadcast radio are talking DJs and ads - the best thing about last.fm is it's ALL music ... so I'm interested but wary about how CBS gets a return on its investment.
Posted by: Ric | May 30, 2007 10:32:52 AM
I totally agree about how song consumption is changing. As soon as I explain to someone that Sonos lets you listen to all the songs you want when you want for the cost of 1 CD a month and the only issue is you do not own the music on your PC nobody cares about owning it and cannot believe that much music is available on demand for such a low price.
Once services like Last.fm, Rhapsody and Sonos get their story out there in a loud clear way the major shift away from downloads should really begin. They just need to keep making it easier for people to take it for a test drive. No dount, all in good time.
Posted by: Howard Mann | May 30, 2007 10:36:59 AM
Hmm, Techmeme gave me a choice of blogs to comment on, and I chose this one (as you're a long-time fan and a VC).
One of the reasons, I, as a European, flocked to Last.fm, because of this whole US-based fiasco regarding net-radio, which lead to Pandora closing off it's international access. Isn't this a worrying trend for investors?
The main issue here is also that Last.fm is British and not yet affected by this afaik. Will American ownership not expose the service to more regulation? Or am I missing something?
Posted by: Vincent van Wylick | May 30, 2007 10:46:03 AM
Wallstrip, then Last.fm, Quincy Smith and his team are really on a tear! The question remains, why didn't corporate brother Viacom-MTV make a play or did they ?
Posted by: Frederic Guarino | May 30, 2007 11:16:15 AM
No caveats around MSM ownership? I love last.fm, but the two reasons I don't listen to broadcast radio are talking DJs and ads - the best thing about last.fm is it's ALL music
Ding. Ding.
Ads will be introduced, and a new non-ad music service will pop up that everyone will utilize it instead of Last.FM, we are a finicky bunch. Its cyclical. I would say that CBS probably took this into account, and understands that their investment is also in the data already associated with people.
It may not be a 1 to 1 correlation with the consumer; ie CBS won't know me from from another user X but they did just purchase a heap of data that people that listen to artist A generally might like artist B. Was that worth 218m with from what I would imagine would be a diminishing user base in the next 5 year?s I am not sure.
Gratz to the Last.Fm peeps though, it is a great service that I have given over 21,000+ little bits of data about me in exchange for finding new music, which I found valuable. I don't think the trade off will be worth it though if they introduce Ads.
Posted by: cyanbane | May 30, 2007 11:21:34 AM
"the best way to listen to music over the internet"
Much like the best way to take a blow to the head, or the best way to get involved in a land war in Asia.
And why do you need a service to tell you what you're listening to, are you asleep when you listen?
It's easy for me, all I have to do is look at the pile of records on the floor by my stereo.
Posted by: jackson | May 30, 2007 12:43:24 PM
ironcially MTV bought the website Sonicnet.com 8 years ago -- Sonicnet had a flash radio application called Radio Sonicnet that does EXACTLY what Last FM and pandora do. but was killed for some unknown reason
Posted by: smartone | May 30, 2007 12:43:52 PM
That Jackson, he really cracks me up.
Posted by: Christopher Walken | May 30, 2007 3:18:47 PM
I made Walken laugh! I can die now.......
Posted by: jackson | May 30, 2007 3:34:12 PM
....further research indicates 'Walken' not Walken.....I do a better Walken than that guy's voki, though he nailed the delivery on 'Death Cab For Cutie'...it's all in the 'cab'.
Posted by: jackson | May 30, 2007 3:39:48 PM
Fred--
This is Bankoff's friend. Agreed on last.fm and the future of music. In fact, just spoke to Doug at TargetSpot yesterday about monetization.
Anyhow, we'll be in NYC on Thur. and Fri. Please let me know if we can get together. Thanks.
Posted by: Toby | May 30, 2007 4:43:48 PM
After analyzing iTunes "Plus" with today's release and its "personalization", I think that on demand streaming IS looking like a better option day by day. I just hope CBS knows how to move with last.fm, after reading the founders comments though I am a little more upbeat about it than I was this morning (and my previous comment).
Posted by: cyanbane | May 31, 2007 12:24:32 AM
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