Reports Silicon Valley Insider:

Warner Music Group (WMG) has pulled its catalog out of Last.fm’s “on demand” free streaming service, which the CBS-owned service launched to great fanfare in January. Users can still hear Warner artists via the site’s “radio” option, which doesn’t allow you to select individual songs. But you can’t order up individual songs from WMG artists.

Why is this important? Two reasons. One, it underscores the fragility of the appeal of these streaming services, whether they charge a monthly fee or not. All this talk about the “millions of songs” promised in the ads obscures the fact that the universe of songs the vast majority of people want or are interested in is a much smaller one—I’m guessing, but let’s say 100,000 songs, representing maybe 10,000 CDs—and that the services in question at any given time are lacking a lot of those.

(This is anecdotal, but consider Hitsville’s essay on covers of “Walk Away Renee”: The iTunes Store has a lot more versions than I expected it would—and blew my mind by having the Gabor Szabo rendition. But it still lacks four or five fairly high-profile covers of it—Rickie Lee Jones, Vonda Shepard, Terry Reid—… and the Left Banke’s original.)

Losing the songs from a huge label like Warners can only hurt.

And secondly, there’s a simmering debate in the industry about where the money companies are getting from such services is going. Is it being apportioned back to the artists—and if so, by what accounting method? (A traditional ten to twenty percent royalty payment, or the fifty percent “licensing” standard?) And a lot of the time, of course, the money just goes into the label’s general fund and isn’t given to the artists at all.

There may be a Catch 22 developing here; the value of the services increases with comprehensiveness, but if each label begins nickel-and-diming the services, they will never reach critical mass—dashing the dreams of those in the industry who think the subscription model is the only thing that can save it.