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Advertising is sometimes seen as the great subsidizer, the mighty and powerful Oz that can pay for all kinds of Internet media.  But Oz couldn’t give the Scarecrow a brain and advertising can’t give all Internet content businesses a good looking income statement.  Free (ad-supported) online radio stations are a case in point.  As the sites grow in audience scale, the license fees behind the music they stream grows too.  Pennies (or even fractions thereof) per song play adds up fast when millions of users are lounging in the soundscape.  Paying that expense with ad income can be a difficult calculus when ad markets are trim.

Last year, it was these license expenses that drove Pandora out of the U.K.  The company said it had no choice “because of the lack of a viable license structure.” When New York based streamer Spiralfrog shuttered, it was more of the same. The company’s doors closed with $34m in unpaid debts looming over them.

CBS owned last.fm has probably been somewhat insulated because of its parent company’s deeper pockets but every benefactor has its limits. 

CBS bought last.fm in 2007 for about $280m and it seems,  is now ready for the property to start payout out a return on that investment.

So, in what appears to be an effort to rebalance the equation, Last.fm announced this week on the company blog that it will begin charging customers a subscription fee for music streaming in select markets.

Audiences in the U.S., U.K and Germany, won’t spot any changes.  But everywhere else last.fm will charge its customers 3 Euros a month for access to its 7 million track library. 

The company’s personalization and non streaming services (charts, biographies, recommendation tools etc) will remain free, but with music, it’s radio free Europe no more.

Update 3/27: Wired has confirmed rival music service imeem is in the process of trying to renegotiate fees with the labels as a result of similar license fee struggles. An industry insider quoted in Wired’s coverage put numbers to the situation explaining: at even $.004 per song stream (which would be the lowest available rate), the site would likely have to be selling 100% of its ad inventory at $4 CPM just to break even. If the cost per song stream jumps to a penny per play, the ad rate would have to hit a CPM of $10.

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