Does streaming lift music sales?

Last.fm says streaming leads to bigger music sales.

(Credit: Lastfm.com )

Free streaming music turns people on to new music and encourages them to buy, says social-networking site Last.fm. In the music industry, this will not come as a huge revelation.

Last.fm, acquired by CBS last May, announced Wednesday that since the company launched its on-demand streaming service two months ago, CD and download sales through its partnership with Amazon.com have more than doubled.

So what does that mean?

Music discovery continues to be one of digital music's greatest vulnerabilities. Nobody has come up with a sure or simple way to help people wade through the millions of tracks available on the Web. Last.fm's numbers seem to confirm long-held beliefs of many that enabling people to sample full-length tracks is one way to spur demand.

So Last.fm can take pride in knowing it was early to an offering that some music fans might find useful--albeit one that isn't exclusive to Last.fm.

Indeed, when it comes to allowing users to test drive music before they buy, Last.fm is definitely in the back seat. Imeem offers unlimited plays while London-based Last.fm only allows a user to listen to an individual song three times.

In addition, MySpace.com is preparing to launch its own streaming service that will offer unlimited plays.

Christian Ward, a Last.fm spokesman, said the company is talking to the labels about rolling back some of the restrictions, presumably the three-play rule.

"We wanted to see how this service works first," Ward said. "(The spike in sales) will encourage more discussion about pushing those limits back."

Ward added that his company isn't worried much about competitors. He said what separates Last.fm from the others is its music-discovery engine that can suggest songs based on what a user has listened to in the past.

"Offering free access to music is one thing but finding your way through all that is another," Ward said. "Music discovery is a lot easier on Last.fm."