It’s no secret that streaming music services must pay a licensing premium to offer their libraries on smartphones and other devices, but now it seems that Last.fm’s ad revenue wasn’t enough to pay those bills.

Effective February 15, Last.fm will charge $3 per month for access on iPhones, Android phones and home entertainment devices such as Sonos and Logitech’s Squeezebox. The exceptions are Microsoft’s Xbox 360, which includes Last.fm with a $50 per year Xbox Live subscription, and Windows Phone 7, which will remain free through 2011. Ads will be removed as part of the shake-up.

Last.fm’s website will remain free with advertising in the United States, United Kingdom and Germany, but Matthew Hawn, Last.fm’s vice president of product, explained in a blog post that an ad-supported service is simply “not practical” on other devices and in other countries.

Even if Last.fm paints this change as a necessity, it’s clear that the service hasn’t withstood licensing and royalty demands as well as competing services.

Pandora, for example, offers a $36 per year premium service but still allows 40 hours of free streaming per month. After that, you can pay $1 to keep listening. Slacker Radio gives away its basic service and charges $5 per month for premium features. On-demand services such as MOG, Rdio and Rhapsody charge $10 per month for streaming that can effectively replace your music collection. Outside the United States, Spotify offers ad-supported, on-demand music but charges a subscription fee for smartphone access.

The real problem is that Last.fm doesn’t have a tangible advantage over these other services, aside from Hawn’s subjective claim that its version of Internet radio is “the best in the world.” Without a freemium business model, Last.fm is going to have a tough time showing smartphone users what it has to offer.

 
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