We7 has added the 1.2 million songs of The Orchard to its catalog (press release). The distributor's titles will be offered as free streams, free ad-supported downloads and paid downloads.

That's great for We7, but it's product offering is still a jumbled mess. One has to wonder if it would be better off setting the bar higher and accepting music only from those labels that will participate in all three offerings. A well-defined product has worked well for eMusic (MP3s only, a monthly rate), Amazon.com (all labels, all MP3s) and imeem (stream everything).

Earlier this month We7 signed up EMI but does not offer the music group's tracks as ad-supported downloads. Sony BMG is also on board, but only for ad-supported streaming. Warner UK is on board as well, but like EMI has opted out of the free, ad-supported downloads.

The majors are hesitant of ad-supported downloads, which add a brief audio clip before each song. CEO Steve Purdham told paidContentUK, "Ad-funded downloads have had to take a slightly rear seat, the main reason is the economics between industry expectations and what the ad world is prepared to pay means that the gap is still too wide."

Ad-supported streaming rates are terribly low relative to other formats. Last.fm COO Spencer Hyman described for the audience of the EconMusic conference the challenges his company faces. "We’re happy to share the advertising revenue we get, but what we can’t do is to give more than we’re getting in. Internet advertising is really, really hard."

In related news today, The Filter announced a partnership with We7 to offer users filtered recommendations based on their listening habits. Peter Gabriel is a co-founder of We7 and an investor in The Filter.