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While Warner Music Group Corp. (NYSE: WMG) withdraws from social music site Last.fm Ltd., Universal Music Group is further embracing the service.

Universal has added its catalog of videos to Last.fm's on-demand streaming service and has agreed to share revenue from advertisements running alongside clips. The deal also includes a provision that Last.fm will highlight UMG's videos exclusively for one month after the agreement goes into effect, bringing clips from Jay-Z, Amy Winehouse, the Killers, Kanye West and others into view.

Warner, the first of the majors to cut a deal with Last.fm, pulled its songs from the site's on-demand service earlier this month, although it continues to allow its songs to be streamed through Last.fm's personalized radio service. A source with knowledge of the situation says Warner felt that Last.fm had failed to deliver promised ad revenue and is trying to renegotiate the terms of its agreement. While Warner has taken equity stakes in other companies that provide on-demand streaming music, such as Imeem Inc., Lala.com Inc. and the MySpace Music joint venture, the source says Last.fm will likely have to cough up more cash rather than equity to keep Warner's music on the site. CBS Corp. bought Last.fm for $280 million in May 2007.

Continue reading at TechConfidential.com.

CBS Corp. (NYSE: CBS) took another step into the internet world yesterday with its $280 million purchase of online social networking/music site last.fm. This follows last week's acquisition of the internet stock market show WallStrip.

last.fm acts as both a music guide and internet radio/music distribution site. Members allow the site to track their PC/iPod listening habits, and the site customizes streamed content of new music matching their tastes. last.fm also allows artists and labels to upload new music (with accompanying permissions), so they can (hopefully) build a following.

The UK-based site began five years ago, and now claims 15 million members.

CBS still owns the largest radio network in the U.S., and I'm interested to see if and how they might integrate last.fm into this business. The two seem to be, to some extent, competing technologies, one in decline (radio), one ascendant (internet). The sale came as a surprise to some pundits who had speculated Viacom (NYSE: VIA), until recently part of the CBS empire, was prepared to offer as much as $450 million for last.fm.

last.fm could provide CBS with a valuable platform for distributing content and a channel to retain advertising flowing to the internet. However, at present, no one site clearly dominates the music networking world. While CBS now has a seat at the table, the fight for ears and eyeballs will continue to grow more interesting.