Last.fm announced earlier today that it will finally start paying royalties to independent bands though its new Artist Royalty Program. While we applaud this move, as artists will now be paid when their music is played on-demand, or via streaming radio on Last.fm, their royalty percentages seem to favor Last.fm a bit too much:

You will accrue an amount each time one of your tracks is streamed on the Last.fm service. The amount will vary depending upon which Last.fm service your track is played. A brief rundown of the various royalty levels can be found below:

- If your track is played on our free radio service you will accrue a 10% of the Share of Last.fm’s Net Revenue (see the definition of “Share” and “Net Revenue” in the terms and conditions) from the free radio service.

- If your track is played on our personalised premium radio service, you will accrue the greater of either 10% of the Share of Last.fm’s Net Revenue from the personalised radio service, or US $0.0005 for each complete transmission on the personalised radio service.

- If your track is played on our free on-demand service, you will accrue 30% of the Share of Last.fm’s Net Revenue from the on-demand radio service

- If your track is played on our premium on-demand service, you will accrue the greater of either 30% of the Share of Last.fm’s Net Revenue from the premium on-demand service, or US $0.005 for each complete transmission on the prepaid or subscription on-demand service.

Not surprisingly, a typical independent artist isn't going to earn much revenue from these percentages, but it seems that Last.fm stands to make quite a bit from advertising and subscription revenue on the aggregate of all indie music played. I'm all for Last.fm earning revenue that allows them to become successful, but it seems these percentages need some adjusting. After all, the artists are the ones creating the content. If not, it begs the question, will digital distribution providers attempt to become the next generation of "record labels"... Merlin may be helping to prevent just that, and has also raised some questions today about Last.fm's new Artist Royalty Program.