Are Ads and Subscriptions the Future of Music?

(For more, see my previous post What is the Future of Music?)

I’ve been using Last.fm for a while now.  It started out as a plug-in for iTunes that recorded the details of the songs you listened to on your computer and iPod, and then sent that information to your online account so that you could see what were you truly favorite artists and songs.  It has since evolved into one of the web’s most popular music-oriented social networks, where one connects with friends as well as strangers with similar musical tastes.

(On a side note, it had been a while since I had checked out some of my stats, and I was a little astounded by what I found tonight.  Since May 2006, I have played 8,156 tracks.  Damn.  1,681 of those tracks have been by Dave Matthews Band, with my second most-played artist being Béla Fleck and the Flecktones with 317 plays.  That’s either a real display of dedication, or a real display of sadness.  I’ll let you decide.  I’ve added a “recenly played tracks” widget to my “about” page if you ever want to check in on what I’ve been listening to.  Recently, it’s been a lot of Josh Ritter.  If you haven’t heard him, check him out.)

Anyway.  Last year, Last.fm was acquired by CBS for $280 million.  I was a little sad at the time, thinking that what had once been a very useful and somewhat niche utility had now sold out to the Man and would cease to be both functional and classy.  But given today’s news, I am pretty sure that Last.fm made a brilliant decision.

Today, Last.fm rolled out the ability for users to play (almost) any song they want, on demand, in its entirety, for free.  Note that this is different from popular web radio service Pandora, which selects random tracks for you based on your preferences, ratings, and listening history.  The new Last.fm service is ad-supported, and music from the “big four” labels as well as smaller labels and independent artists is available.  The only drawback is this: labels have imposed a three-play limit on any single song.  After this, users will be prompted to register for a Last.fm’s forthcoming paid subscription service.

Saul Hansell on the NYT “Bits” blog had this to say about the news:

CBS is perhaps in a better position to offer a service like this than a startup, as it has major relationships with music labels through its radio unit and relationships with big advertisers as well.

So as much as it hurts to say, Last.fm selling out was probably a good idea because it allowed it to fully realize its own potential.   Hansell says this is “clearly the future of music online.”  Erick at TechCrunch adds:

Music needs to be sampled before most people want to buy it. The current Web industry norm of the 30-second clip just won’t cut it anymore. Perhaps Last.fm will help to set a new precedent here with limited full-track streams. It might be difficult for iTunes or Amazon to abandon the 30-second preview, however, because neither one has an ongoing revenue stream from advertising or subscriptions with which to pay an ongoing royalty. At least, not yet.

But will this really be a game-changer?  Will Amazon and iTunes be forced to head towards a subscription-based model with a limited number of free, ad-supported plays?  Well, the first thing to remember is that, for the moment, this can only really be implemented online.  The Microsoft Zune has sort of achieved a song-limitation model on shared tunes between devices, but from what I’ve heard this limitation has been hacked away with minimal effort.  Maybe with the built-in Internet connectivity of the iPhone and iPod Touch this will change, and maybe down the line we’ll ditch our hard-drive based mp3s for online streaming.  But I think that day is long off.

Further, I think people will always have a desire to own their music.  There is a “connection” and value there that is different from subscribing or renting the music, just like there is a different connection and value associated with an owned car versus a leased or rented car.  I’m not saying that the Last.fm initiative will fail; it will probably be wildly popular.  People will still want to listen to music for free, or even rent music that they don’t want to keep forever.  But I don’t think it is “the” music model of the future. [Update (1/24/08, 9:30am) - Ars Technica basically agrees.]

What do you think?  Give it up in the comments.

Image courtesy of BBC News.