Last.fm, the social music network owned by CBS said on Wednesday it is introducing a free service for fans to listen to their favorite songs on-demand.
The new service is being launched in partnership with the four major music companies, as well as over 150,000 labels and artists.
When fans in the United States, Britain and Germany search for an artist on the Last.fm Web site, they can now stream the artist's song for nothing or pay to download an MP3 version of the song via Amazon.com.
Last.fm said the streaming service is funded by advertising revenue, which is shared with the music companies.
The move comes nearly six years after Last.fm first started reaching out to music companies to license songs to stream on its site.
"They wouldn't even take our calls back then," said Last.fm co-founder Martin Stiksel.
"But our motto to always do the right thing by respecting artist copyright has helped us in our discussions," he said.
A source familiar with one music label's dealings with the network said because Last.fm is now backed by a major media company like CBS, it gave it a "leg-up" in discussions, compared with other start-up digital music companies. CBS paid $280 million for Last.fm last May.
Terms of Last.fm's deals with the music companies were not disclosed, but the source said Last.fm would pay a 'per-play' fee or a percentage of advertising revenue — whichever is higher. The source said Last.fm also paid an advance.
Vivendi's Universal Music Group, Sony BMG Music Entertainment, Warner Music Group and EMI Group own the rights to around 70 percent of recorded music globally. Sony BMG is jointly owned by Sony Corp. and Bertelsmann.
London-based Last.fm has more than 15 million active users in over 200 countries and until now has been best known for its song-recommendation system, which tracks users' music-playing habits and link them to other fans with similar tastes.
Users of the site also build communities or networks around their favorite artists, similar to those seen on social networking sites like Facebook and MySpace.
Free music streaming or Internet radio sites have had varying degrees of success in obtaining affordable licenses from music companies. The sites, typically small start-ups, have also been burdened by hefty royalty fees payable to the music industry both in the U.S. and in Britain.
Stiksel said Last.fm's primary role as a music community site has meant that it typically has a higher number of page views than a pure Webcaster such as Pandora. Pandora said it would close its U.K. service this month due to high royalty fees.
A higher number of page views by a Web site's users would usually mean more advertising revenue.
CBS has said it hopes to build new communities for online videos with Last.fm that will include its own archive of hit shows as well as non-CBS videos.