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Freeloading limit

25 March, 2009

As far as predictions go, this is likely to be the beginning of a series of features on the sustainability of various net-based business models experiencing the expository glory of the Web 2.0 surge over the last few years. And conveniently helping to kick-start this debate, revolutionary social music network Last.fm very briefly announced on the Last.HQ blog yesterday that they are to begin charging a non-optional subscription rate (should you choose to continue using the service) to users living outside the United Kingdom, United States and Germany. This €3.00-a-month decision is suggested to come as a result of the international licensing fees that have restricted the likes of Pandora from fully tapping into markets beyond their conventional core user-base back in 2007. Understandably, this creates a veritable dilemma once considering how it is precisely the regions beyond the UK, US and Germany in which such multimedia platforms have been seeing unbridled interest, use and support amongst a diverse forum of users and music listeners as they become increasingly connected and integrated with one another through technology and word-of-mouth. Of course this wouldn’t be the first instance of a move towards charging a premium for content, seeing as online news publications and Google (TBC) are already foraying into a world where free content is yielding to the need to compensate for falling advertising revenue in face of the economic downturn.

But before I grind my axe about YouTube and others, it is important to highlight the fact that the current state of free content simply cannot be sustained forever if one is to also expect product innovation, service differentiation and the expansion of  services offered online. I have written numerous times about Last.fm, very much in praise of what it has done to shape the media landscape in terms of enriching the music listener’s experience whilst facilitating interaction with enthusiastic and perhaps like-minded individuals on an international scale unparalleled despite the recent flood of new music-oriented web platforms. Slightly less obviously so, it has additionally helped to cultivate one’s passion for a variety of musical stylings that may have ordinarily taken a lifetime to explore, furthermore helping to dispel the notions of bad science linking music to the twisted world of profit-based corporate initiatives and targeted advertising (although when examining the nature of the press release, that latter point can easily be disputed). It is for these reasons and many others that the current model would undeniably need to be modified to sustain the company after the CBS acquisition and, sadly, the subsequent laying-off of staff here in East London this past December.

Now Last.fm states that the ‘business decision’ was needed ‘in order to keep providing the best radio service on the web’ and ‘support all the other free services’, promising to provide ‘unlimited access’ alongside improvements ‘for years to come’. One should emphasize, however, that user communications support, scrobbling, charts, recommendations, the events calendar, etc., will remain free for access worldwide. They optimistically state that there will also be a ’30 track free trial, and we hope this will convince people to subscribe and keep listening to the radio’. But despite that all seeming to be in the user’s best interest, the expected backlash will perhaps supersede that which took place following the major interface overhaul last summer. The flood of comments and forum dialogue already provides a fair amount of indication of such, with statements ranging between a series of disapproving expletives and those highlighting the increased attractiveness of alternatives such as Grooveshark, Deezer, RadioVeRVe and Spotify (especially in France). People have also enquired about the precise geographic determinants of the charge (IP address, postal address, nationality?), whilst expressing that the service should either be free for all or free for none.

It is that final note that directs attention to the notion of freeloading and the future of content consumption in a world where not only licensing varies extensively, but also purchasing power parity of currency differs between countries in a manner which makes a move such as Last.fm’s seem highly discriminatory. And it may be the case that the lack of consistent pricing across the board in member countries may prove to be at odds with EU law. But there does seem to be a general view that loyal users who may already be subscribed will go unaffected regardless of location; meanwhile, freeloaders will switch to the alternatives mentioned above, therefore increasing the cost of competition throughout the entire marketplace for everyone (including the competitors). In theory, Last.fm can take this risk now, especially if there is concern as regards to how the recent spike in the popularity of Spotify’s free on-demand service will cut into the Last.fm radio-listening user-base — that is until the two applications become more complementarily integrated. Whether the move will lead users to turn to Spotify or revert back to illegal filesharing is yet to be seen, though I suspect a younger audience located outside the G3 nations who are without the convenience of credit card access will resume (if not doing so already) the use of P2P and mirrors without any trouble at all.

According to Last.fm’s Matthew Ogle, the UK, US and Germany ‘are the countries in which we have the most resources to support an ad sales organization, which is how we earn money to pay artists and labels for their music. We are focused on the US, UK, and Germany as key markets, with the help of the CBS Interactive salesforce and our own sales team here in London. Our headquarters are in the UK and we’ve always had a strong presence in [Germany]. And so we’ve made the decision to focus on these markets for free streaming radio.’ But it would be naive to think that this only impacts specific markets, because web developers will be affected as well. As Steven Bengtson, a creator of the application Songbird, has pointed out, ‘this is also a big pain [because] we are releasing an update to our Last.fm add-on that allows streaming [and now] too bad for those other countries’. In addition, the same goes for labels whose main operating base lies outside of the G3, as a representative from a Brazilian label mentioned in discussion, making Last.fm less prominent of a feature in terms of marketing the music of a label to a home audience facing a price barrier under the proposed scheme.

Out of all the Last.fm user comments, perhaps this one best sums up the current situation: ‘It’s been a pleasure building up a global database for you so you can turn it into gold and then screw people over.’ A successful business strategy is, after all, extremely difficult to fine-tune and maintain whilst adapting to market forces fluctuating in a volatile global economic climate — not to mention the difficulty in appeasing everyone involved, especially when everyone is the massively infinite online community. Evolution is absolutely necessary in order to stay afloat and survive in the longrun, and a good demonstration of prospective monetization of web-based applications to build up the coffers in ways surpassing the potential of advertising was the spoof article in recent circulation on Twitter, itself about Twitter and the creation of premium accounts. Already Twitter has begun to test its own advertising model, bringing it closer in line with Facebook’s Beacon. But whereas content on networks such as Twitter and Facebook is user-generated rather than licensed by media industries (music, mainstream news and ‘premium’ video content) long struggling in the advent of piracy and online technologies, advertising no longer seems to be helping to balance the books.

To be honest, as I am currently in London and already a Last.fm subscriber, I am not particularly affected. However had I been in either Stockholm or Cairo at he moment, I would have to reconsider the burden of my subscription (probably dropping it for the latter city in question due to the exchange rate). Having written my IB dissertation on socio-economic disparity rooted in exchange rates and purchasing power parity in relation to the Third World some years ago, €3.oo will never seem to me to be a ‘mere’ €3.oo to be spent on something in a country where bootlegs are no more taboo than breathing the polluted air is. But for the time being, I will have to ask fellow neighbours and Last.fm users about whether or not they would be willing to pay the premium — especially if they are Spotify users as well. And I’m sure that the general outlook will change once Spotify becomes available worldwide, though considering the headache of all the licensing red tape it’s currently up against, part of me thinks global domination will be very unlikely for some time yet. But until then, perhaps Last.fm would be best advised to adopt Facebook’s recent approach of democratization if it is to maintain its popularity — and hopefully then it will take into serious consideration the feedback it has received from its users thus far after such a significant proposal of change.

Sarah Badr © MMIX

See also: Spotify v Last.fm (pieces at random)

Love thy neighbour (pieces at random)

Site overhaul (pieces at random)

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3 comments

  1. My comment is rather irrelevant but I edit the post to include the proper credits :)


  2. Thanks a lot, Sara — I really appreciate it!


  3. [...] Freeloading limit (pieces at random) [...]



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