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Show us the money, indies tell Last.fm

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Indie music site Last.fm was basking in the glow of its own moral virtue yesterday, as it expanded its trial scheme to compensate unsigned artists from advertising revenues.

"Last.fm Compensates Artists, Unlike Some People We Know," was WiReD's headline. The revenue-sharing program apparently promised "the chance to garner some independents quite healthy returns", trilled Hoaxable. And channelling the collective ignorance of TechCrunch, The Washington Post even asked "Who needs music labels?".

But not so fast, say the indie labels themselves. Last.fm doesn't pay most independents, and where it does, you'd need a microscope to see the royalties.

Last night Merlin, the new licensing outfit established by the independents representing 12,000 labels worldwide, issued a statement to members pointing out that Last.fm only has limited agreements with indies in two territories.

"We have for the last few months been negotiating with Last.fm regarding a non exclusive blanket licence and a settlement agreement on behalf of Merlin members," the outfit said in a statement. "Unfortunately, these negotiations have stalled - in particular due to Last.fm's unwillingness to properly address its illegal infringing activity."

Merlin also warned artists that the revenue share program was ambiguous, and could be designed to shaft them.

It brings into the open a dispute that has been simmering for months. Indies feel that their "positive and progressive" approach to Web 2.0 music startups contrasts with the Sue, Grabbitt and Run approach of the majors: but don't think that Last.fm hasn't reciprocated the goodwill.

Indies reckon the game has changed since CBS acquired Last.fm for $280m. The site can no longer claim to be a cash-strapped start-up, now it's owned by a corporation with a market capitalisation of $11bn.

The Beggars Group withdrew its catalogue in November, and Warner Music followed suit in March.

"The only deals are limited ones with the PPL in the UK and SoundExchange in the US, and some labels," Merlin told us.

Indie sources point out Last.fm's licence is limited, excluding on demand streams for example, and far below the rates paid out by rivals such as Rhapsody. A label source confirmed that Last.fm's pay out was tiny.

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But will the new program, ARP, really help artists?

TechCrunch's Erick Schonfeld thought so. "It creates a direct economic link between Last.fm and up and coming artists that have not yet been discovered or signed by a label," he wrote.

For sure - but possibly it's one that resembles the "economic link" between a sharecropper and a landowner.

Last.fm itself sets the royalty rate - bypassing arbitration proceedings. It also draws from a very limited pool of money, which excludes subscription revenue. If you thought your €2.50 Last.fm sub was going to help out artists - forget it. The widget designers need to take their cut, and with subs, they take it all.

What this means is that there's only a small percentage (ten per cent) of a very small amount of money - advertising revenue.

"Where is the advertising on Last.fm?" one label asked us today. It's hard to find any. TechCrunch, predictably, again saw the sunny side:

"We're not talking a lot of money here, a few fractions of a penny per song. But as the online music industry grows, and along with it online advertising targeted at music listeners, these numbers in aggregate could start to become meaningful."

But what the Web 2.0 boosters won't tell you is that advertising revenue on 2.0 style social networks is heading south for the recession, and probably for good. MySpace advertising rates have plummeted to $0.13 (CPM).

So you can see how on the web plantation, the desperate 2.0-ers need the music suppliers to provide the music for free. No wonder they want to abolish copyright, and with it any legal responsibility to pay the creators.

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