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November 11, 2010
We7, the ad-funded streaming service, has announced a change in strategy, now focusing on "Internet Radio Plus," similar to the automated recommendation services Last.fm and Pandora.
A simple radio function was launched in January 2010 and works by consumers picking a single track with an automatic recommendation system picking complementary tracks. We7 announced the strategy change in response to the consumption pattern of their 3 million monthly users since the Internet Radio Plus function was launched in January 2010. The service was used by 63 per cent of all We7 users in October; with regular users using the service 83 per cent of the time.
The company will continue to offer on demand streaming and will still be ad-funded with its partner Yahoo providing display advertising sales for We7. Over the next 6 months the service will change to become more focused on "Internet Radio Plus." We7 launched in 2007 and has over 6.5 million tracks from Sony, EMI, Warner and The Orchard.
Although We7 does have premium options including mobile apps, it reportedly has less than 10,000 subscribers; having not been aggressively marketed. We7 has experienced the danger for ad-funded on-demand music propositions which often couple low CPMs while paying both labels and collecting societies on a per-play basis: popularity ultimately spells loss and debt.
We7 is reducing a significant cost to the business: advertising revenues only began to cover We7's royalty costs in April 2010, after the company had begun to transition to a radio model where the royalty payments are lower. By contrast in 2009 where it was still operating on a true on-demand streaming model the company posted a loss of £3.66 million.
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