The Social

Fresh off launching an ad-supported streaming music service for its Last.fm property, CBS Interactive is already touting success.

According to a release from CBS on Friday, there were 85 percent more unique listeners on Last.fm on Wednesday, January 23--the day that CBS Corporation and Last.fm announced the service--than there had been on the previous Wednesday. The next day, Thursday, saw an 80 percent increase from the previous Thursday, which CBS took as evidence that it wasn't just a single-day phenomenon.

Last.fm had previously offered streaming music primarily in 30-second clips. But thanks to licensing agreements with all four major music labels, the social music service now allows users to stream a song three times for free before being given the option to purchase the song at a number of digital music stores.

Actual traffic to Last.fm hasn't jumped quite so much: CBS reports 27 percent more unique visitors and 45 percent more page views over the same time period. That suggests that existing Last.fm visitors are indeed tuning into the new music offering, but that it might not be boosting membership numbers quite yet. Claiming early success, however, is important PR for CBS: many have lost faith in ad-supported streaming music. Once hyped as the solution to both peer-to-peer piracy and the iTunes monopoly, enthusiasm has faded as start-ups like SpiralFrog have made disappointing debuts.

CBS executives have remained optimistic, suggesting that big-media muscle may be the secret to making free streaming music work online.

It's no secret: ad-supported streaming music, held up as an alternative to both paid downloads and free-for-all piracy, has hit some twists and snags. A number of well-funded start-ups, like SpiralFrog, dove into the space and few have emerged intact. Only one, Imeem, can really claim to be a success--it has licensing deals with all four major music labels--but it's still been criticized for a tepid user experience.

So it was a bit of a surprise when CBS' big announcement about Last.fm, the music-based social network it purchased last year, was the launch of a free, ad-supported streaming music service.

Previously, most music content on Last.fm had been limited to 30-second clips.

According to Quincy Smith, president of CBS Interactive (the CBS division that owns Last.fm), big media companies may be the key to making ad-supported music a success. "Only media can bring those kinds of sponsorship relationships," he said in an interview with CNET News.com, adding that broadband penetration has reached a point where streaming music is legitimately viable.

With the new on-demand music program from Last.fm, which launched Wednesday in the U.S., U.K., and Germany, CBS has all the majors on board as well as over 150,000 independent labels and artists. Additionally, it has an "artist royalty" program so that unsigned artists who upload their music to Last.fm will receive a cut of the ad revenue when a track is played.

Smith said that Last.fm's music recommendation and "scrobbling" engine may also give it an advantage in the ad-supported music space, because that data can potentially help advertisers choose where to place their ads. "You've got targetability," he said, "and not in a freaky, invasion-of-privacy way." Presumably, that could lead to better advertiser confidence and higher click-through rates. People who listen to a lot of pop, for example, could see ads for Justin Timberlake concert tickets; country fans could be served up Nascar ads, or movie soundtrack fans could see ads for the latest blockbusters.

But targeted advertising, like many of the other developments that CBS Interactive plans with Last.fm, hasn't been rolled out yet. "We wanted to make sure we got that announcement out there to the consumers first," Smith explained. Later, we'll start to see some of the projects that were rumored yesterday, when it became evident that Last.fm was making a big announcement--including, perhaps, a video-related service.

"We certainly own (the domain) Last.tv," Smith said.

But even an established media powerhouse like CBS hasn't been able to completely nail down the model. Last.fm's streaming service has already gained a bit of criticism because tracks can only be streamed three times--after that, the user is given the option to buy the track from a Last.fm retail affiliate partner like iTunes or Amazon MP3. When asked about this, Smith said that the three-song limit wasn't CBS' choice.

"It was a joint decision from all parties involved," he elaborated. "You've got to do the baby-step thing with these guys."

If the digital music business were a game of poker, Imeem can now claim to have a royal flush--sort of.

(Credit: Imeem)

The music-centered social network, which focuses on ad-supported streaming music and video that its members can arrange into "playlists" on their profiles, has announced a deal with Universal Music Group that gives Imeem access to full-length recordings of the recording giant's entire digital music and video catalog. This means that Imeem now has deals with all four major labels as well as a large number of independent labels.

The sprawling catalog of Universal Music Group, a division of Vivendi, encompasses artists like Kanye West, Amy Winehouse, Fall Out Boy, Black Eyed Peas, Gwen Stefani, The Killers, Snow Patrol, and Maroon 5.

"If (the Universal deal) isn't a vindication for what we're doing, I don't know what is," Imeem co-founder and CEO Dalton Caldwell said in an interview with CNET News.com. He highlighted the fact that Universal has recently cracked down on the use of its content on most social-networking sites, requiring its streaming music clips on MySpace.com to be limited to 90 seconds rather than full songs. Imeem, Caldwell said proudly, has access to the entire files.

It's a sharp change in fortune for Imeem. Just over six months ago, the company--which then allowed users to upload and stream music despite not having deals with the labels in place--was sued by Warner Music Group for copyright infringement. Social-networking leader MySpace, too, had blocked Imeem widgets out of piracy concerns. Imeem then settled with Warner and got to work on licensing ad-supported content. It was a smart move; otherwise, the Palo Alto, Calif.-based start-up could've gone under entirely.

But Imeem is used to changing course. The company was originally founded in 2005 as a generic social network in the form of a downloadable client that allowed members to communicate, share files with each other, and create interest groups. Since then, it's shifted its focus almost entirely to streaming music and music videos, and user accounts now tally about 19 million.

So what's next? "The thing we really need to do is monetize this thing and prove that we can make money," Caldwell said. And some critics have hinted that the user experience could use some attention, too. But if the free, ad-supported streaming model (there are no downloads or subscriptions involved) proves successful, Imeem executives hinted that they may try applying it to other forms of media like TV or film.

"In the beginning of 2008 you'll see a flurry of things happening on the video side," chief marketing officer Steve Jang said in an interview.

For now, executives have ruled out selling the company and cashing in. "This is the good part. We've been working so hard on these deals that we don't want to entertain (acquisition offers)," Caldwell said. "We just want to soak in the goodness of accomplishing our goals for a little while."

He clarified that even though virtually the entire music industry is on board, Imeem is still an unproven product. "I feel like we just ran a marathon, and we finished it, and I'm so proud of us," he explained, "but let's see if this works. We really are excited to prove the model out and all of the good vibes that went into getting here, we want to see them bear fruit."