When Economies Collide: Last.fm
Posted on April 21st, 2009 by Russ. Filed under Uncategorized.
I’ve been reading Larry Lessig’s book Remix over the last few days, and one thing which struck me is his comparison of sharing economies against commercial economies. A sharing economy is something such as friendship, love, Wikipedia, or Linux, where no money is exchanged; A commercial economy is where money is exchanged.
Lessig notes, with lots of examples, that even attempting to compare a sharing economy with a commercial economy will end up in trouble. In sharing economies, “price is poisonous”:
You have, or have had, or will have, lovers. That relationship exists within a complex, sharing economy. The statement “Wow, that was great. Have $500″ isn’t gratitude in such relationships. It might be perversion, but if not matched by perversion on the other side, it will likely be terminal to the relationship. [...] Prostitution is sex within a commercial economy. Both sides seek the simplicity of cash.
At this point, something rang true for me. Way back in 2004, RJ and I were working on Audioscrobbler, while Martin and Felix were working on Last.fm.
Audioscrobbler was naturally a sharing economy: you contributed your listening data, and in return you received recommendations for new music and people who shared your taste. Last.fm’s premise was to make a personalized radio station. This unashamedly exists in a commercial economy, even if the price was free for several years.
In 2005 we merged these two sites — both sites were doing almost the same thing — and last month the shit hit the fan. We had created some kind of hybrid commercial/sharing monster, supported for the time being by investment and ads. Now nobody has any money to throw at anything, so we have to ask for money in an economical way: only asking for money in places where it makes up for our ads shortfall.
Sure enough, when we went from apparently being a sharing economy to charging for the bits which cost us the money, all hell broke loose. Despite this, in the countries we are charging, we’re running the equivalent of the good old Audioscrobbler service, plus a music streaming service with an identical, country-specific, business model to Spotify.
I wonder how many other startups which seem like sharing economies are going to have the same problem as Last.fm: staying true to their users’ impressions of the service and going under, or being forced to charge and potentially losing their users’ trust.
You can’t win, sometimes.
April 21st, 2009 at 15:13
Is it really that complicated? Isn’t it just the basic fact that people would rather have something for free than pay for it?
April 21st, 2009 at 15:53
I had to leave a comment – you’re completely over-thinking this.
April 21st, 2009 at 16:41
“Now nobody has any money to throw at anything, so we have to ask for money in an economical way: only asking for money in places where it makes up for our ads shortfall.”
If you actually read the comments in response to the last.fm announcement, you will see that it was the inequality that pissed people off to the point of leaving the service.
Had last.fm charged -everyone- equally, and not pissed off 95% of the world population by reducing them to “some parts of the world”, my guess is things have would gone differently.
Both last.fm’s way of handling -and- communicating this was horrible and largely to blame for how this played out.
April 21st, 2009 at 16:44
I understand that Last.fm needs to charge; I think that it’s unfortunate that you decided to do so based on geography (when the net is “supposed” to be “beyond” geography).
My problem is that I just discovered Last.fm two months ago, and hadn’t had enough time to decide whether I like the service or not, at least not enough to decide whether I want to pay a monthly fee (I live in Canada). So, Last.fm lost me because I actually have a fairly good mix on my iPod and the Genius results are good within that mix.
If Last.fm had been something that I felt I couldn’t live without, I’d probably be subscribing. I pay for a number of other services on a regular basis. Unfortunately, your timing sucked, at least as far as I’m concerned.
April 21st, 2009 at 16:57
I have to concur with other commentators: You’re reading the wrong signs. You’ve divided the world into haves and have-nots and it isn’t going that well for you.
No double this is confusing for you, you never saw large swaths of the EU as have-nots. But just ask them about their shopping habits when they make it to Germany, the U.K. or the U.S.A (amazing how you hit it perfectly, those really are centers of western consumerism).
The upside, you’ve no doubt reminded lots of the have-nots that they actually HAVE. I know this because I’ve spent the majority of my life not in one of your special countries before coming to the States. It will spur them to more action, just like Brazil is taking the Internet & software development worlds by storm. Oops, that’s an upside for everyone who’s not you ;-)
This is coming off as rude and mean. I’m sorry, that wasn’t the intention, but it’s probably not worth the trouble of rewording it to be softer, the point might get lost.
April 21st, 2009 at 17:11
I like your point. This may be why micro payments drive people away with such emotional force. If people knew getting in that they were joining a commercial economy they wouldn’t be upset. It is only in changing it halfway that becomes a problem.
April 22nd, 2009 at 10:29
Oh boy, here come the same old arguments, rehashed over and over again. Someone on the forums described it as the strategical equivalent of “asking mom for ice cream for the 15th time” which I find very appropriate.
It comes down to this:
– act like an adult: figure out if streaming radio is worth 3 € or not, either spend the 3 € or don’t, leave or don’t. The world really doesn’t care. Trust me. Even if you announce it over and over.
– act like a child and find yet another way to justify what comes down to “MOM, that kid has more toys than I do – it’s not fair”.
Let’s move on already.
June 20th, 2009 at 01:06
Hello :)
Basically, the upshot was you gave away too much information, and in doing that, you gave away your power.
The overall message I got from all those complaints was: they didn’t want to know who could pay their way and who couldn’t. In their eyes, a blanket fee imposed on all would have been fairer. You were too honest for your own good, in other words.
Companies that have set out with similar parameters don’t face such vitriol. It’s accepted. One or two might grumble but if they never had it, they don’t miss it. e.g. Spotify, Pandora, however many others.
People in Last.fm complained not just because you had to make some changes, but also because it brought home just how bad the economy is. i.e. if something that’s supposedly self-sustaining and free (cheap enough to run without our money) suddenly imposing fees, then how bad is the economy exactly?
So you met with denial as much as cluelessness.
(in my never humble opinion)
I like the idea of a hybrid commercial/sharing economy. Kind of reminds me of compassionate economy I was reading about not long ago, which is capitalism but nicer.