CBS to buy social network
CBS Corp. is buying a popular social-networking website organized around musical tastes for $280 million, combining a traditional broadcast giant with an early leader in online radio.
CBS is expected to announce today that it has acquired London-based Last.fm, which claims more than 15 million monthly users, including more than 4 million in the U.S.
The initial payout is well beneath that paid by rivals in the last two years for video-sharing site YouTube Inc., now owned by Google Inc., and for MySpace, the top social destination on the Web, bought by News Corp. The final price for closely held Last.fm could rise substantially if performance targets are met.
“Last.fm is one of the most well-established, fastest-growing online community networks out there,” CBS Chief Executive Leslie Moonves said in a prepared statement the company planned to distribute today when it announced the deal.
“Their demographics also play perfectly to CBS’ goal to attract younger viewers and listeners.”
CBS executives, led by new CBS Interactive President Quincy Smith, believe Last.fm can continue its recent rapid growth. Last.fm declined to comment.
The purchase is emblematic of the sharp change in direction at CBS, which owns the oldest U.S. broadcast television network and one of the country’s largest radio networks.
Instead of focusing solely on creating programming, the long-staid company now sees its mission as reaching the broadest possible audience in any medium, including the Internet and cellphones.
Last.fm offers Internet radio -- the steady streaming of songs to computers. But it’s a tough business now because of a recent ruling by the Copyright Royalty Board that would significantly increase the royalties Internet broadcasters pay for streaming digital songs.
CBS is also trying to fill out an advertising portfolio that already includes conventional radio, broadcast and cable TV and outdoor services.
With Last.fm, users tell the website what music they are listening to. The site recommends other music they might like and links to buy the songs. For music it doesn’t have licenses to play, it offers 30-second samples.
Music sales aren’t a big part of the financial picture so far, and they might not be even when CBS takes control. The minimal advertising on the site, however, will be beefed up. CBS envisions channels for music backed by corporate sponsors that will pay for the privilege every month.
CBS also plans to put versions of its existing radio programming on the website.
“We see it as a chance to get new eyeballs -- or in this case earlobes,” said a CBS executive familiar with the deal who spoke on condition of anonymity because it had not yet been announced.
Last.fm is trying to keep growing by adding video programming. The music-driven growth feeds on itself, meanwhile, because the recommendations get better as more listeners participate.
Last.fm has struck content deals with major labels EMI and Warner Bros. It also distributes small pieces of software that users put on their profiles elsewhere on the Web to display the music they’re hearing.