Last.fm's legal trouble?
Also: Warner Music partners with Lala.com | It's bound to happen. You make a mint, and old friends come out of the woodwork. In the case of Last.fm, it's an old colleague who claims he was unfairly dismissed. — I followed up on a story by Music Week …
Context & Ripple Effects
The claim lands four days after GigaOM framed Last.fm as CBS' $280 million hedge for its radio business — a valuation reached on only about $5 million of venture funding. A former colleague now says he was unfairly dismissed, and the Guardian reads it as the predictable moment when 'old friends come out of the woodwork' once a startup makes a mint.
The dispute arrives mid-expansion for Last.fm, which launched a personalised video section in May 2007 and has positioned itself as aiming to be the MTV of the Web 2.0 era, with reported risks already flagged around the shifting Internet streaming royalty structure. Separately, Warner Music announced a partnership with Lala.com, continuing the label's habit of striking direct deals with new distribution startups.
First-order effects
- Last.fm and its new owner CBS face an unfair-dismissal claim at the exact point when the company's reported $280 million price tag turns any past employment grievance into a monetisable one.
- Warner Music gains another direct digital channel through Lala.com, adding to its portfolio of deals outside traditional retail.
Second-order effects
- CBS inherits legal exposure inside an asset it just agreed to acquire, meaning diligence and settlement costs now sit on the acquirer rather than the bootstrapped startup.
- Other early employees and contractors of fast-valuing Web 2.0 music companies have a fresh template to test their own equity and dismissal arrangements.
Third-order effects
- If exit events keep converting early-team grievances into litigation, startup employment and equity paperwork becomes a priced-in risk line for media acquirers like CBS.
- Label partnerships with distribution startups such as Lala.com point toward labels hedging declining retail through many small direct deals rather than a single licensed intermediary.
The trend: As web music startups convert community scale into nine-figure exits, pre-exit employment disputes are emerging as a recurring cost of acquisition, alongside labels' parallel drift toward direct startup partnerships.