A requiem for last.fm?

I certainly hope not but as I commented on Eric’s blog, I must admit to being disappointed and somewhat anxious upon hearing that they have sold themselves to CBS. This anxiety comes both as a customer and as an admirer and believer in the paradigm-changing potential of their platform. Ironically, after having used last.fm over the last year or so, last week I purchased a 12 month premium subscription, primarily to have access to “my radio station” (to listen click the big red button on the right sidebar.) And although it has proved to be a bit rough around the edges, I began to see that if they got their links to buy music and tickets (to events) right (api with iTunes store please?) it would become the natural way for me to purchase live and recorded entertainment – the revenues stream was starting to look potentially very real. Now let me say straight off that I have no visibility or view on the valuation, but it seems intuitive that it is likely to look generous based on current financials, and in absolute terms it is hard to argue with last.fm’s founders and backers taking the money; or put another way, I admit it is easy for me (with no financial exposure) to sit here and second guess their choice. However, if the motivation was financial security, locking in the win so-to-speak, I would posit that in today’s world there are a myriad of innovative financial options generally available to provide liquidity for owners beyond the traditional digital choice of IPO or trade sale…

However, putting financial considerations to the side and coming back to my two sources of anxiety…

As a customer, I just hope that in the medium term they are allowed to continue to innovate and especially that they are able to continue to treat their customers with respect. As partners. That may seem self-evident, but the track record of the music industry in this regard does not inspire much confidence. Indeed it is testimony to the compelling and real value of creative artists and their product, that the industry continues to function at all. If music truly was a ‘discretionary’ good, I suspect the industry would have collapsed on itself as customers disgusted by the convoluted and adversarial service they are asked to endure simply said ‘enough, I’ll take my money elsewhere…’ There is also the more universal (non-sector specific) issue of the inability of large organisations to avoid suffocating innovation.

That said, if last.fm can at least avoid going backwards, I’ll continue to be a happy customer ‘as is’, at least until something (much) better comes along. More disappointing from I guess what could only be described as a philosophical point of view, is the risk that the potential I thought was embedded in their approach to really change the way the music (and possibly other forms of art and entertainment) business worked. (Which also is the reason I think this post is germane to The Park Paradigm just in case you thought I was wandering ‘off script’ yet again!) The line of thinking I want to pursue probably originated with a series of discussions a couple years ago with Malcolm, who helpfully articulated some of this on his blog:

As I have mentioned before I think the future of the industry as well as obviously being digital in nature is in the collaborative and personal spaces around such as last.fm and myspace. I think this particular future inexorably leads to new artists being initially funded by members of the collaborative communities who will, for their funding, be returned a share in future profit streams. This particular vision of the future is clearly not in the best interests of EMI: distribution will be handled by these spaces and the online music stores (distribution becomes essentially free as does the cost of production of each unit) and PR is also free as it is handled by the members of these communities and will be handled in their own interests. (PP note: viewed from this perspective, a cynic would say the CBS deal is defensive in nature: buy them before they can hurt you. A cynic. Not me.)

Clearly I have markets on the brain – for better or worse – but the potential I saw in last.fm was to use it’s brilliant organizing and community building software to ultimately allow the fans – the consumers of music – to become owners as well. And I’m not talking about CDs or MP3s, I’m talking about equity in the artists themselves. Creating a more efficient market in which to deploy capital (production, promotion, creation…distribution (digital)) backing artists, capital that in the current paradigm is effectively only available via a small-ish cabal of music companies. Think of it in terms analogous to replacing turn of the (20th) century JP Morgan (big universal banks with an oligopoly on capital allocation) with the turn of the (21st) century securities markets and you might see what I’m driving at. Too late tonight to go into detail, hopefully the point is somewhat clear.

In any event congratulations to the last.fm team on creating a fantastic product and here’s to hoping I’m sadly mistaken on their future prospects in their new home.

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