CBS buys music recommendation service Last.fm for $280M

Updated

CBS has bought music recommendation website Last.fm for $280 million, the extremely popular London-based company that lets users search for and listen to music based on their past preferences and recommendations of other users.

Last.fm says it has around 20 million active users each month, four million of which are in the US. The purchase comes at a time when services such as Last.fm are growing extremely quickly. Other private competitors showing growth are Pandora and iLike. The deal is significant because it gives Last.fm greater distribution, by integrating with other CBS channels.

The CBS deal is a win for London’s Index Ventures, which has been on a roll with investments in companies such as Skype and Tellme. Index invested a mere $5 million into Last.fm exactly a year ago. The deal nudges Index’s Danny Rimer, who is on Last.fm’s board, closer to the top of the VC pack, in terms of track-record — and most certainly seals his place at the top of those under 40.

CBS has been on a rampage lately, striking deals and partnerships with more than a dozen Web 2.0 companies to seek distribution through new Web channels in order to access younger viewers, including buying video site Wallstrip last week.

Viacom was earlier rumored to be in talks with Last.fm. (update: Investor Neil Rimer tells us this rumor was a load of crock.)

Last.fm focuses on user preferences, sorting music based on user feedback, whereas Pandora recommends music based on song characteristics that are similar to ones you have previously chosen. iLike is more similar to Last.fm, and is showing tremendous growth on Facebook‘s platform, heading toward 1 million new users within the first week of integrating with that service — though works only with iTunes recommendations. Last.fm also submits recommendations from music from other players, including on your desktop. There are more than 500 monthly track submissions on Last.fm.

Under the accord, Last.fm co-founders Martin Stiksel, Felix Miller and Richard Jones will remain in east London.

Last.fm, just four years old, has struck deals with with EMI and Warner Music.

Pandora, meanwhile, has raised more than $20 million from Crosslink Capital, Labrador Venture Partners, Selby Venture Partners and WaldenVC. iLike has raised $13.5 million from IAC’s Ticketmaster five months ago, giving Ticketmaster 25 percent of the company — a deal that may make Ticketmaster look pretty smart based on Last.fm’s $280 million valuation.

The deal will only add to the frenzy we’re seeing in M&A right now. In addition to iLike and Pandora, Santa Clara, Calif.’s Mercora, another music discovery site, is also in play.

Update: We just talked with Index’s Neil Rimer (Danny’s brother), who said Last.fm will be in an even better position to serve music, because of CBS’ range of partnerships.