The New York Times-20080124-CBS to Make Internet Music Unit More Like Radio

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CBS to Make Internet Music Unit More Like Radio

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CBS said Wednesday that it would expand its Internet music service, Last.fm, to allow users to listen to any song on their computers whenever they wanted, up to three times.

The move is expected to give a lift to the idea that music through the Internet can be similar to radio -- free and supported by advertising -- yet give users a choice of what they want to listen to.

Until now, Last.fm has offered what is known as Internet radio. Users could listen to a series of songs selected by the service on the basis of their musical tastes, but they could not choose individual songs. Under the new arrangement, users who visit the service's Web site (www.last.fm) can search for and select any of 3.5 million songs to listen to on their computers through technology called streaming. There are limitations: any given song can only be played three times.

What is more, the free music cannot be downloaded to a portable player, like an iPod. Song downloads will be offered through a link to music stores, including Apple's iTunes and Amazon.com.

Ultimately, Last.fm will offer users the chance to buy a monthly subscription that will allow them to listen to songs as many times as they want.

Quincy Smith, the president of CBS's Interactive unit, said the company would prefer to offer more free music, but said there was a healthy tension over this with the music labels.

They want a subscription-based service more and they want downloads, Mr. Smith said. I want to pay attention to the users, and the first thing the users want is free streaming.

Indeed, music executives say they are skeptical that services like Last.fm will be a source of significant revenue. Greg Scholl, the chief executive of the Orchard, which handles digital sales for a independent record companies, said that Last.fm and other free services resemble radio, which offers promotion for music, except that the labels receive a small payment.

In the long run, nominally paid promotion is not necessarily going to support artists and labels, he said. We are supporters of what they are doing, but we are watching it very carefully to see that it makes economic sense.

CBS would not comment on the financial arrangements with the record companies. But people with knowledge of the transaction said the record companies would receive a part of the advertising revenue. Some record labels also received an upfront cash payment, subject to a minimum of a fraction of one cent a play.

Independent artists and labels can also upload their songs to Last.fm, and will receive a portion of the advertising revenue.

The music industry has struggled to find attractive alternatives to illegal music downloading, and some consider free ad-supported services as an answer. Real Networks's Rhapsody service and Napster have both offered free music on their Web sites for several years, but they have mainly tried to attract customers for subscription services that charge $10 or $15 a month for unlimited listening.

The challenge with the advertising supported models is driving a large enough audience to drive high adverting rates versus the high cost of the content, said Chris Allen, the chief operating officer of Napster.

CBS will start promoting the Last.fm service on the Grammy awards program on Feb. 10.

CBS bought Last.fm, which is based in London, last May for $280 million. The service says it has 20 million users worldwide.

[Illustration]PHOTO: Leslie Moonves, chief of CBS, left, with Felix Miller, chief of Last.fm, and Quincy Smith, president of CBS Interactive, on Wednesday. Last.fm will offer users a monthly subscription. (PHOTOGRAPH BY JOHN PAUL FILO/CBS)