This is the first in a series of music business CEO interviews from our industry knowledge partner, StrategyEye. Here, Last.fm co-founder Martin Stiksel about business growth, piracy and how the internet is changing the way that music is consumed.

The traditional music industry model is in crisis. What does the future hold in terms of business models and where does Last.fm fit in?
Basically everything is up in the air – there is a lot changing. Last.fm is trying to pioneer a new model,
whereby people can have access to music wherever and whenever they want rather than having to own it
, like the old model where you had to buy a CD or even a download. With connectivity becoming more widely available you don’t need to have it and store it. You’ve got access to much more music than you would ever have with a walkman or even an iPod. An iPod can hold 30,000 tracks, but Last.fm gives you access to millions of tracks – something that you could never store.

As far as the business model is concerned this obviously changes the ball game. Last.fm is ad supported
basically whenever you listen to a song we put display advertising next to it which doesn’t get into the way of you actually listening to and accessing the music. If you buy a CD, the artist gets money once. If you access music and you listen to it a million times, the artist gets money a million times. It might be smaller revenue, but it’s continuously monetised, whereas with a CD, you only get paid once.

How can Last.fm compete against online music piracy?
It’s interesting. You cannot really say [to users]“go over there and don’t go here” because people will always go where it’s most convenient, where it’s easiest to access music and where there is the biggest offering.

The only thing that we can hope to do is compete on a user level, by giving great recommendations, by making it easy to find music and by giving consumers reliable results. Peer-to-peer doesn’t really give you these possibilities. You need to know what you are looking for on peer-to-peer to find it.

How has the direction of the company changed since the CBS takeover in 2007?
We are pretty much following the same path. We are trying to run a business, we are trying to get more music, we are trying to grow our internet site and we are trying to become the last place that you have to go for all your music needs online. That was the mission when we started and that’s still the mission. That’s why we called it Last.fm.

When CBS took over Last.fm you said your goal was “to get every track ever recorded and every music video ever made” onto your network. How close are you to achieving this?

We’ve gotten a lot closer but we’re still no where near there. This is going to be an ongoing concern because there’s new music coming out all the time and more music produced than ever before because it’s cheaper to produce music than ever before.

We recently announced a partnership with Universal Music Group’s videos – so we’ve got the biggest record label in the world and all its music videos on Last.fm. We get our artists and labels that work with us to upload lots and lots of videos on the site directly.

Are videos as important to revenue for you as recorded music now?
Absolutely. It’s a firm part of the online music industry and videos have a strong part to play in this instance.

In June, Warner pulled some of its tracks from the Last.fm service reportedly because it wanted higher fees. Are you close to resolving this?
We are in ongoing negotiations with them but I cannot comment on ongoing negotiations. We want to solve this as quickly as possible, but that’s all I can say.

Is profit growth or user growth currently more of a priority for you?
They’ve always been hand in hand for us. If music gets played, then artists and record labels need to get paid. We need to make money to facilitate this. Since the beginning, by putting advertising on the site, by enabling people to click through to third-party sites to purchase music – we were basically trying to tap into all different sorts of revenue that one could generate around online music.

Last year it was reported that you were looking to hit profitability by the end of 2007 – did this happen?
I cannot really comment on the details. We are part of a company which is traded on the stock market so this information cannot actually be given out by me.

Can you reveal any information about revenues or profits?

No unfortunately not. We are still very much into growing our audience and that’s going really well. We are achieving double digit growth from month-to-month.

Last.fm recorded a 62% increase in unique visitors for the year ending August 13 2008, according to latest figures. In the US there was a 20% increase in unique visitors, while worldwide the total number of minutes spent by users on the site increased 108%. The site currently has more than 21m signed-up users.

You recently launched an artist royalty programme where unsigned artists receive revenue if their songs are listened to. How have labels responded to this scheme?
The labels were fine with it because it essentially opens online advertising revenue up to a group of artists and musicians that were previously excluded. This is for DIY artists and tiny record labels that are not signed up with a royalty collection society, or artists that are not signed up with a label. It’s an additional pool of content that we are getting in this way and it’s frankly the only way that we can license this content – by making this available basically on a self-service basis.

What differentiates you from other free music streaming services, such as Jango, Pandora and Imeem?
It is the completeness of the service as much as the personalisation aspect. These services [Jango, Imeem and Pandora] just do one aspect of what we do. Pandora does online radio and Imeem does on-demand music. We do all of these things, and we personalise everything to your music taste. I think this is really the speciality.

New music, new people, new events, new downloads, new album releases – everything finds you. It’s music discovery for lazy people. Its promotion for lazy artists too, because obviously the recommendation works the other way round as well.

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James Martin

James Martin is Head of Social Media for Midem organisers Reed MIDEM. This includes defining and rolling out Midem's social media strategy, editing midemblog, influencer outreach, developing Midem's fanbase of 75,000+ music professionals and more.

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