Lala.com Offers Music Storage and Streaming

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Lala.com started out as a CD-swapping service, acting as an exchange point by which music fans could swap CDs via regular mail for $1 apiece. Now, Lala is re-inventing its music model, offering to let users upload their entire music libraries to Lala, then stream those songs anywhere once a user logs into their Lala account—and users can even fill up their iPods directly from the site without having their iTunes library on hand. The service is available now in beta form.

And, perhaps more significantly, Lala is offering members ad-free, streaming versions of music from Warner Music Group, for free, with no strings attached, and says it’s in talks with other labels. Users can stream all the music they want, for free, and Lala will pay the labels for it, no strings attached, Folks who like that they hear can buy tracks for $.99. Lala co-founder Bill Nguyen says the company is prepared to pay up to $140 million in music licensing fees over the next two years: “We’ll be reporting some crazy losses at first but we’re prepared to weather the storm,” Nguyen told the AP.

“Before today music was ripped and trapped on PCs and Macs with desktop applications like iTunes,” sayd Nguyen in a release. “The iPod is the greatest portable music device ever invented, and as avid iPod fans we wanted to create a service that blends the convenience of the Web with the portability and functionality of a truly universal platform. Lala unleashes the Web’s power for playing music and safely sharing songs without the threat of PC viruses, spyware, and other risks that are present on illegal P2P sites.”

Lala’s streaming model is based on the idea that people who have access to free music buy more music than those who don’t. Lala wants to put free music in front of people, get them interested in it, and make up the difference on the back end with increased music sales. Lala’s proposition is based on the iTunes-like idea that music consumers generally want to own their music, rather than merely “rent” it for a limited time via a subscription service. Lala hopes that by giving members full access to streaming version of songs, they’ll be more likely to buy the music and recommend it to other Lala members—who will, in turn, buy the music.

Right now, Lala’s streaming feature is only available for tracks controlled by Warner Music Group; tracks from other music distributors are available, but play only 30 second snippets.

Not to be overlooked, Lala’s is offering an “online locker” to which users can upload their music libraries from iTunes or other applications, then access them from anywhere a user can log into their Lala account. If Lala already has a copy of a particular track on its servers, it just uses that master copy; otherwise, the music is uploaded from a user’s system directly to Lala. Lala lets users create and manage playlists, and promises users will be able to transfer music from their online digital libraries directly to an iPod without first going through the iTunes application. (Instead, downloads happen via a browser plug-in for Mac and Windows.) Users can share a library with friends and stream each others’ playlists, and “future-proof” their digital music purchases by getting a physical CD for a “convenience fee” starting at $2.99.

The idea of an online digital music locker is not new: the original MP3.com offered such a service years ago, and was promptly sued by record labels who successfully claimed the versions of the music on the MP3.com servers constituted unauthorized copies. Lala apparently hopes to insulate itself from record labels’ ire by paying to stream full versions of labels’s songs. Similarly, free online streaming is not an entirely new thing: at one time Napster of its music catalog, with the caveat that tracks couldn’t be listened to more than a few times a month.

Lala’s new business plans are at the very least audacious, and, if successful, will undoubtedly attract the attention of larger players in the online music space. However, Lala seems to see itself as a complement to iTunes, rather than a competitor. Apple has traditionally treated the iTunes Store as a loss leader towards selling iPod hardware; a successful music store which works with iPods and lets people use and access music in new ways may, in the long run, act to increase the utility of Apple’s famously closed music platform.

Lala.com currently boasts about 300,000 members, and plans to continue its $1 CD swapping business unabated.

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