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The three founders of Last.fm, the UK-based internet site combining radio and social networking, will collect $38m each after selling the business to CBS, the US television network, for $280m (£141m) in cash.

The website, where users can stream music and create pages in which to recommend music to each other, was founded in 2002 by Martin Stiksel, 32, a former music journalist from Austria, and Felix Miller, 30, a German music buff. They were joined a year later by Richard Jones, 24, a computer expert finishing his last year at Southampton university.

When it started up with four servers in an old dungeon in Vienna, the company was so cash-strapped it had to put up its computer programmers in tents on the building’s roof.

However, Last.fm has expanded rapidly, with several couples meeting through the site and marrying. The website has spread largely by word of mouth and now has 15m registered users round the world, 10m artists’ pages and offers 95m music tracks.

Last year, Index Ventures, the technology venture capital firm, was believed to have invested less than $5m into the company. Its stake is now worth $56m.

This year, Last.fm signed contracts with EMI and Warner Music and now offers music videos as well as audio tracks.

The sale of Last.fm and the buzz round internet radio firms such as Pandora comes amid pessimism over commercial radio in the UK. “The difference between Last.fm and the broadcaster model is that it puts the listener in charge,” said Mr Stiksel.

Among various media, radio has suffered the most from the sharp rise in internet advertising. Advertisers have also stayed away due to the faltering audiences for commercial radio. “As long as the share of radio listening keeps on falling, so will its advertising,” said Adam Smith at WPP’s GroupM.

The latest radio audience figures from Rajar showed that commercial radio’s share of listening nationwide was at 42 per cent in the first quarter against the BBC, which was at 56 per cent, the highest share ever.

Commercial radio executives have argued that commercial radio remained a “robust medium” with 89 per cent of the population between 15 and 24 listening to an average of 19 hours’ radio a week. However, GCap Wednesday said it was investing in digital websites to enable listeners to communicate with each other and recommend tracks.

Copyright The Financial Times Limited 2017. All rights reserved.
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