CBS & Last.fm

CBS buys social music site Last.fm for £140m.

· TV firm gains access to online community of 15m
· Founders started in single east London room

Katie Allen, media business correspondent
Thursday May 31, 2007
The Guardian

US television network CBS has paid $280m (£140m) for London-based music and social networking website Last.fm.

The deal - the largest UK web 2.0 acquisition to date - gives CBS access to a fast-growing online social network for a fraction of the $1.65bn Google recently paid for online video phenomenon YouTube.

Set up in 2002, Last.fm tracks the music tastes of more than 15 million users, provides them with customised radio stations and connects them with other listeners to share recommendations.

It claims to be the world's largest social music platform and has users in more than 200 countries, including almost 2 million in Britain and 3.5 million in the US.

The undisclosed windfalls for its founders may not quite match the sums paid to the creators of YouTube and MySpace but the $280m deal is a welcome payoff for a project that started out from one room in Whitechapel, east London.

The site struggled to raise funding in the early days and, unable to pay the rent on their own flats, the team lived in tents on the roof of their office. Last.fm took donations from sympathetic observers and friends to stay afloat while it looked around for bigger investors.

"When we started in the dire days of 2002 no one wanted to put any money into online music because Napster had just been sued into submission," said founder Martin Stiksel. "We took it without any external investment up to over a million users so we had to cut some corners with the sleeping arrangements."

It then attracted the interest of Index Ventures, which has also bought into other success stories such as Skype and purchased by eBay for $4.1bn. Now Last.fm, which will continue to be run as a separate business in London, hopes the CBS deal will lift it to a new level.

"It's great news for making sure Last.fm sees through its mission and becomes the last music destination on the net," said Mr Stiksel. "We can do all the things we only dreamed about before. We have a lot more ideas in the pipeline that we can now put into effect and also we have a strong partner on our side."

The management team, including the other founders Felix Miller and Richard Jones, hope the tie-up will mean they can negotiate better deals with record labels and cheaper rates for music streaming.

The acquisition, all in cash, follows a number of moves by CBS to expand its online presence including the acquisition of video business news blog Wallstrip.com and investments in Joost, the web TV service created by the co-founders of internet telephone service Skype.

CBS chief executive Leslie Moonves said the deal was a major step in the group's attempt to transform itself from a "content company into an audience company". "Their demographics also play perfectly to CBS's goal to attract younger viewers and listeners across our businesses."

The president of CBS's interactive division, Quincy Smith, said: "We looked at a lot of companies to provide a base for CBS's investment in online reach, and found Last.fm to be poised at an inflection point - balancing fast growth, a sticky community and the opportunity for monetisation that does not distract the user."

Guardian Unlimited © Guardian News and Media Limited 2007