In an apparently counter-zeitgeist move Warner Music have announced that they’re pulling their content from Last.FM’s ad-supported on demand music service. Wired ponders whether this be part of a negotiating tactic by WMG with a view to securing an equity stake. This probably isn’t too far off the money. This growing trend is not just about labels wanting to increase revenue and share in the success of new emerging platforms. (Nor is it new, taking equity stakes was standard practice for EMI in the pre-historic days of digital music). It is, perhaps most importantly, about the labels trying to secure their future.
These equity stakes are investments in all possible future scenarios, to ensure the labels have money in the game for each. It is possible that the online music market will be dominated by consumption based models such as Last.FM rather than transaction based distribution solutions such as downloads. In such a scenario, particularly if it precipitates a broader shift away from transaction based distribution, the labels will feel that they need to own some of the game to retain their margins. So, much as the labels may be licensing to new, edgier services, they’re not by any means taking uncalculated risks.