Canvas to cash: The £141m musical revolution composed in a tent

Sleeping in a moth-eaten one-man tent on the roof of a warehouse in London's East End, Richard Jones was the only one who believed he would one day start an online music revolution.

While his friends laughed at him for not having a real job, the computer science student slaved away at his desktop, living on a diet of chickpeas and rice and getting by on the meagre remains of his student loan. For five months, he was woken at 6am by the sun turning his roof-top tent into a furnace, before making his commute to the office: a poky warehouse downstairs.

As he went about his routine of sleepless nights under canvas, long hours and no pay, the computer-science graduate from Southampton found it hard to convince anyone that the software he'd developed at university would change his life - and the world of music downloads.

Yet now, almost exactly four years from the day he first pitched his tent on the Whitechapel warehouse roof, the self-confessed computer geek is on his way to becoming a multi-millionaire. The music and social-networking site Last.FM which he painstakingly set up with friends Martin Stiksel and Felix Miller has been bought by US entertainment giant CBS - for the tidy sum of £141m.

The 24-year-old had been happily working on his computer science project at university in Southampton when people started to take notice of the originality of his music site, a pet project he had called audioscrobbler. Fellow students were hooked - and in the spring of 2003 his project caught the eye of the media.

Two men who read about audioscrobbling in a newspaper had more than a passing interest in Mr Jones and his website. Austrian Martin Stiksel and German Felix Miller were excited by the unique software the student had created that could analyse music-listening habits and build up profiles of individual tastes by recording what was played on a computer or iPod.

They knew they had to meet him. "It looked really exciting", remembers Mr Stiksel. "We wrote him an email then jumped on a train to Southampton. As we sat in a park together talking, we realised we wanted to do very similar things, so he agreed to come and work with us."

From that moment onwards - when the three co-founders came together for the first time as colleagues - the groundbreaking music site Last.FM went from strength to strength.

Mr Stiksel and Mr Miller had already created the site, but it lacked the technological know-how and originality of Mr Jones' own start-up. Instead of using data taken from the computer itself, music tastes were calculated after users had rated songs individually as they were played.

But Mr Jones' idea of scrobbling - a term he came up with - was totally new. He had invented what the company calls "the lazy man's way to discover new music". Instead of trawling through playlists rating songs, music enthusiasts could have their entire digital music collection "scrobbled", or analysed, by a program to determine what they played most, and what they might like. Jones explains: "I always had a personal interest in music stats. People always ask you what music you listen to most, and I wanted a way of knowing the actual answer."

Last.FM's three co-founders had actually met several years previously through a friend at a gig. "We shared a love for obscure noisy electronic music," said Mr Stiksel, who had been working as a sound designer, creating jingles for television stations, before he began the venture.

In the beginning, the project was funded almost entirely on savings. "We had a tiny bit of advertising on the site but our budget was next to nothing," Mr Stiksel explains. "It was always a struggle to pay the £800 rent each month, and there were moments when we couldn't pay it at all. We had to borrow money from parents, and mine were in Austria. They were so supportive but they really wondered what we were doing as they couldn't see any tangible results."

Despite the financial hardship, the music enthusiasts remained optimistic: "We knew we had to stick to it", says Mr Stiksel. "No matter what people said, or how much money we had, we knew that so many people had failed before because they had the right idea at the right time but didn't see it through."

So when they brought Mr Jones on board in 2003 the pair were unable to provide him with a salary. "We just couldn't afford to pay Richard, but we cooked him lunch, and let him sleep on the roof. It was hard for all of us. None of us had any social life because we didn't have the money or time."

Mr Jones says: "It was tough, and I had a couple of really rough nights in the tent. The sun would come up at 6am and I'd have to get up quickly to avoid getting boiled. We were all working pretty much all the time, and doing far too many hours a day."

It wasn't until 2005 that the site's progress began to gather momentum. Under the guidance and outside funding of new chairman and former-DJ Stefan Glaenzer, Mr Jones's audioscrobbler website was officially merged with Last.FM, bringing the number of users up to 20,000. By the end of that year, they had hit the one million-user mark.

From there the site has grown exponentially. The "social music revolution" now has over 15 million active users in more than 200 countries, and claims to be the world's largest social music platform. Users from around the world log on to their own customised radio station to learn what new music they might like, based on information "scrobbled" from computer track libraries, such as iTunes.

By tapping into two rising internet trends of social networking and music sharing, Last.FM created a niche. Users can listen to songs and also chat to friends. Profiles similar to those on networking sites such as Bebo, Facebook and MySpace can be edited to include personal information alongside your music tastes.

Another key to the website's success has been its use of live music streaming software, which meant they were able to avoid the legal difficulties that became a stumbling block to downloading sites such as Napster. Instead of downloading tracks permanently, members of the network can only listen to other people's music while they are logged into the site.

Mr Stiksel remembers the difficulties convincing investors: "When we started in the dire days of 2002, no one wanted to put money into online music because Napster had been sued into submission."

But CBS believe it is a bargain at US$280m - a fraction of the $1.65bn Google paid for YouTube. Leslie Moonves, president and CEO of CBS, says: "Last.FM is one of the most well-established, fastest growing online community networks out there," she remarks.

"Their demographics play perfectly to CBS's goal to attract younger viewers and listeners across our business."

According to Ms Moonves, the site is likely to grab a cult following. "Music has the unique ability to unite large groups of people and engage them around a shared passion."

This latest acquisition is one of a number of moves by CBS to improve their online presence, following a string of recent website purchases in recent months.

Mr Jones, who has now moved on from his tent-dwelling days, also has no plans for a major lifestyle change: "It's a chance for us to make the project even bigger, and that's what I'm most excited about."

The trio are determined not to forget their humble beginnings. Tonight they are throwing a party to celebrate their successes on the exact spot where Mr Jones once pitched his tent.

Started from nothing...

Google

Stanford University students Larry Page and Sergey Brin started work on what would become the world's largest search engine in 1996 as part of their PhD projects. Focusing on how websites link together rather than solely on keyword frequency, the pair developed complex algorithms that have since brought them a fortune of $14bn each.

Face book

Twenty three-year-old Mark Zuckerberg originally set up the social networking site for his fellow Harvard students in 2004. Members can load up personal information, photos and create a community of friends, with whom they can exchange messages. Access was later widened to anyone with an email address and the site now has 25 million users.

Wikipedia

The online encyclopaedia heralded the beginning of 'Web 2.0', the generic term given to websites comprising user-generated content. Former banker Jimmy Wales launched the English language version in 2001 as a non-profit organisation. Although it now has 7.4 million articles in 253 languages, it has quality control problems.

YouTube

Three newly redundant PayPal employees, Chad Hurley, Steve Chen and Jawed Karim, began the video-sharing site in the back of a garage in February 2005. Part of the Web 2.0 phenomenon, users now watch over 100 million video clips a day. Google bought the website for $1.65bn in November 2006.

lastminute.com

Founded in 1998 by Oxford graduates Martha Lane Fox and Brent Hoberman, the website was an icon of the dotcom boom. It made a fortune selling unfilled seats on soon-to-leave flights but was hit hard in the 2001 dotcom crash. The company recovered and was sold for £577m in 2005.

Kevin Crowley