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We7 morphs into Last.fm-style radio

A lot less like Spotify, see

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British music service We7 is shifting emphasis to personalised radio-style streaming, which means lower royalty costs… and fewer comparisons with upstart Spotify.

We7 says it will keep the on-demand streaming component, but put more emphasis on the sort of features offered by Last.fm and Pandora. There's another advantage: lower costs, with royalties for radio-style streaming one third of the rates for on-demand.

The company launched the former in January and says it now accounts for 55 per cent of plays.

Peter Gabriel is an investor in We7, which launched in April 2007. Two years later Spotify was storming the market. We7 goes for a younger and poppier demographic, and has also developed iPhone apps and an offline subscription service.

However, that demographic is much less inclined to pay subs. We7 is reckoned to have around 10,000 paying punters, compared to Spotify's 500,000. But Spotify has effectively turned off the free music tap - you really need to join.

The hype around on-demand music streaming has eclipsed former pinups Last.fm - a candidate for "are they still alive?" pub quiz questions - and Pandora. But the economics of on-demand is brutal. In 2009, We7 saw income of £361,081 but cost of sales was £1.5m and admin expenses £2.5m - producing a loss for the year of £3.68m.

It's very much in start-up mode. ®

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