Online music too costly

From time to time, I write about online music (e.g., lastfm). I enjoy the music, but there are also other interesting issues (e.g., copyright, social networking, online business models). By online music, I am not describing music sharing, but sites that operate much as radio stations with additional features. For example, lastfm maintains a history of the music a user has listened to on his/her computer/ipod. The site then identifies “tastes” and matches users allowing the discovery of new artists and communication (if desired). Favored artists are not perfectly matched across the lists of individuals with similar tastes so the assumption is that there is some value in discovering what is unique in the interest of someone with similar interests.

It appears there is now a serious problem for the online music sites

While all forms of U.S. radio pay royalties to songwriters and publishers through rights organizations such as BMI and Ascap, record labels and recording artists have not received performance royalties from radio in this country, because radio was thought to have a promotional effect on sales. With sales flagging, labels and artists are trying to collect licensing fees from all uses of their music, including radio. Satellite radio stations must pay a small percentage of revenue, while terrestrial radio stations currently pay no royalty to labels and recording artists. (Wired)

Some sites are in greater difficulty than others. Pandora offers music without the benefit of social networking or the storage of data on listening habits. If no one backs down, Pandora would likely be forced to shut down because the ad revenue generated through user visits would not offset the cost of offering music. While a nice feature, lastfm does not have to offer music to provide users a service.