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.

Wouldn’t a Microsoft/Yahoo melding in the end be good for Google? As things stand now, Yahoo is a valid alternative to Google at least partially based on the company’s hip origins and faintly Google-like approach to customer service. Yahoo is overcommercialized, of course, and is somewhat annoying to use, but it does have the most fun IM program. [BUZZ!] And, of course, it isn’t Microsoft.

Once Yahoo is Microsoft, however, Google will have one major competitor—and an easy-to-dislike one. So why is Google helping Yahoo out in its squirming maneuverings to stay out of Redmond’s clutches?

The latest NY Times story on the negotiations is here; WSJ’s ($) is here. Basically, two Microsoft -imposed deadlines—one last weekend, and another Wednesday—have passed, leading to Hamlet references in the press, like this WSJ blog item:

The Microsoft-Yahoo saga is taking on a Shakespearean feel—to buy, or not to buy.

Microsoft’s board met Wednesday […] and failed to come to a decision. The big question weighing on what Microsoft’s next move will be is how badly does its CEO Steve Ballmer want Yahoo.

As of this writing, Ballmer’s options seemed to be either launching a full-on hostile takeover bid, which would alienate some Yahoo staffers whose goodwill the company would surely need in a takeover, or undertaking a longer-range plan to try to suborn the company from within by nominating and electing new boardmembers.

This far, in response, Yahoo has been dutifully noting that it was not opposed to a sale to Microsoft, though at a significant premium over the $29 a share price now on the table. In the meantime, it has been trying to work with AOL and Google to come up with some sort of alternative arrangement.

Yahoo is a public company and has to live life as a public company, and if Microsoft can convince Yahoo’s stockholders to sell, well, it gets to buy it. But on an entirely extra-economic level it’s worth noting how surpassingly lame an operation Microsoft is at this point. It tried to start its own search engine—and failed. It tried to go up against the iPod—and failed. Through the brute-force moves of bundling its services with most computers sold in the U.S. it managed to make MSN and MSN Messenger factors, but neither has a raison d’etre. The company’s solution? Buy the competition.
That would leave Google; couldn’t the company then just watch, as the customer experience of Microsoft’s online services heightened the contradictions, so to speak? Or is the potential amassed advertising power combined with its inherent advantage as the producer of Windows too much to contemplate even for Google?

It’s Monday and time for another new music service. A new deal of this sort requires a media borg of the past to “team up” with a media borg of the future to try to figure out a way to sell stuff to people who are slowly beginning to realize they don’t have to pay for it any any more and in any case generally buy it from Apple when they do.

The new borg this time is MySpace; the borgs of the past are record companies, three of the four biggies, Warner, Sony and Universal, with EMI expected to join soon.

They Times story on this Very Important New Development is here.

WSJ here. The Journal says:

MySpace Music will offer free, ad-supported audio “streaming” and sell digital downloads that will play on a variety of music devices, as well as concert tickets, merchandise, and ring tones and other content for mobile phones.

The new service, the Times tells us:

[…] is also an attempt to encourage competition to Apple’s iTunes Store, which some music executives have criticized for exercising too much control in pricing and on other business terms.

As we have seen in the past, “exercising too much control in pricing” translates roughly into “stopping us from raising prices.”

What the companies want to do is do what they used to do: When they have hot new product they think they can get away with charging a premium for, they want to jack up the price. Because of the file-sharing neworks, it’s going to be harder and harder for the labels to do this.

But a company can dream, can’t it?

Still: HWTAA?

(How will this affect Apple?)

Steve Jobs does OK. The new service will sell mp3s, which are compatible with folks’ iPods. And other services are one watermarking or rootkit scandal away from self-immolation.

Most interesting is the tie-in with merchandising. It’s smart for the labels to at least attempt stick themselves in the mix with these (lucrative) products, though the stories are vague about whether these will be label-MySpace deals or done separately with the artists.

The stories say the service will open later this year.