Controversy swirled last week on allegations that Last.fm’s parent company CBS gave the RIAA user data for possible use in civil and criminal cases. All those involved in the story have denied these allegations, though Techcrunch stands by the story.

It’s impossible to filter the he-said she-said right now, so instead let’s look at all the good that can come from the RIAA looking at Last.fm’s data. First, it’ll be almost impossible to make any case based on the data – Last.fm shows what music people listen to, but not the source (whether its legal or pirated). Instead, the RIAA could use this massive amount of data on real listening behavior to find new revenue streams and marketing opportunities. The RIAA could see exactly who likes one thing and then listens to another, helping to plan concert schedules and other events (like they already do with piracy data).

What would be even better is if the music industry took this data and used it to find new musicians and bands that fit the listening tastes of music fans (the ones listening). Using actual user actions can be much more efficient than focus groups or other market testing, but rarely is that data available. Of course, this is another benefit of the internet’s cheap and easy distribution – easy market testing. Post a new song to Last.fm or YouTube and see what happens. Do a little self promotion and you might have the next Susan Boyle on your label.

Of course, the RIAA won’t do any this. They’d much rather claim they’ve stopped suing people then continuing on suing. More money there than actually finding new business models.

The old guard of media have years of status and experience that make them seem more important. The Associated Press’ recent hoopla over links to its articles shows a disconnect from the old guard to the web world. Start-ups dream of getting some New York Times coverage because that would just set them up for success, but they ignore an article in TechCrunch or popular story on Digg might be more valuable.

Martin Varsavsky wrote for the Huffington Post about publicity his company Fon was getting. The New York Times featured him and his company on the cover of the Sunday business section followed by an article in Forbes magazine. But his website only saw 200 new uniques. A popular post on Digg netted him 50,000 uniques.

Varsavsky recognizes the benefits of print media - more resources, physical product, and established reputation. “Paper is more credible than pixels” he says. But if its traffic you need, old media won’t help you.

The Associated Press reminded me of this issue because, even as it whined about other websites sending it free publicity, the A.P. refused to link to other websites. It had no problem quoting them and saying the name of the blog, but wouldn’t include links to the quoted blog. The New York Times has recently started adding links, mostly to their blog and not their articles. Other mainstream media sites leave you the impression there’s nothing else on the web. Even new media companies like IMDB.com won’t provide links to sources, even when quoting them directly.

The issue is these links are incredibly valuable. The major tech blogs and aggregators, TechCrunch, Gigaom, Slashdot, and Digg to name a few, can bring a website down because of all the traffic they send. And once that traffic is on your site, it’s your job to keep them there. 2.3 million people read the Sunday times, but it’s a lot harder to get them to sign online and go to a website. With a link provided, you just click. Easy, no effort, effective.

Mainstream media needs to join the link culture. Linking to other sites isn’t just polite. Many sites (like Prodigeek) show links to sites linking to them. I’ve gotten reliable traffic from several blogs and that traffic inspires me to link to them more. Moreover, I don’t like to link to websites that don’t link at all (unless they’re the original source). I’d prefer to send traffic to other blogs who share in the link culture than news sites that don’t. And companies that are hostile to the link culture get blacklisted.

For companies trying to monetize their website, whether through sales, advertising, or something else, need to put their PR where the traffic is. That means publicize on the TechCrunches and Gigaoms and taste makers of your industry. The credible that comes from a Times article sounds nice, but it isn’t helping you meet traffic goals. As companies (hopefully) recognize this, blogs and websites will gain credibility as they become the next-generation of king-makers, discovering the next Googles, Microsofts, and Facebooks while the mainstream media plays catch up. Mainstream media needs to join the link culture (which includes not suing websites) or get left out and left behind.

Updated 6/24 1:37p.m. - I just read a great post by Chris Brogan on this same subject, noting how the Boston Globe wrote out the link to his blog on their website and newspaper, but didn’t link to it.

The Associated Press has been kind enough to give bloggers more a week’s worth of posts with all its antics bullying websites and charging people for quoting more than 4 words. After several instances have shown the A.P. quotes blogs (without links), the A.P. decided to quote another blog once more for old times sake. They decided to quote TechCrunch, for irony’s sake, in an article about all the brouhaha over their own anti-quoting policy.

TechCrunch’s Michael Arrington announced he sent the news wire a DMCA takedown notice and a bill for $12.50, according to the organization’s own pricing chart for quoting 22 words from his post. Arrington describe’s his actions:

Am I being ridiculous? Absolutely. But the point is to illustrate that the A.P. is taking an absurd and indefensible position, too. So I’ve called my lawyers (really) and have asked them to deliver a DMCA takedown demand to the A.P. And I will also be sending them a bill for $12.50 with that letter, which is exactly what the A.P. would have charged me if I published a 22 word quote from one of their articles.

Kudos to Arrington for standing up for bloggers and fair use.

Update 11:48 a.m. - The A.P. released a statement this morning saying the matter between it and the Drudge Retort, the original target of DMCA takedown notices, is closed.  No details about what was actually discussed.  Just move on, nothing to see here.  Let’s see how that works for them.