Lala.com gives it away

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Lala.com‘s new on-demand music service launched with a splash today, with coverage in the major papers and numerous blogs. It certainly turns the longstanding music-industry assumption on its head: by giving people unlimited access to a fully stocked online jukebox, Lala’s Bill Nguyen believes he’ll increase music sales, rather than slaking demand. Nguyen, who made a fortune on previous dot-com start-ups, says he’s trying to save the music industry by providing a great place online to buy music. I’m not sure the site he’s building fits that description, however.

For starters, it wasn’t working well at all for me today or yesterday. The only relatively reliable feature was the ability to play groups of non-DRM’ed tracks from my personal collection, a copy of which Lala stored for me in an online locker. (Until it gets all the licenses it needs from the labels, Lala requires you to upload the songs from your PC. I have about 7,000, and it took about 12 hours for the uploading to complete.) I have much better results using Avvenu to play my PC’s songs and playlists through the Net, even though I can do that only when my PC is logged on.

Lala’s online jukebox could become an attractive alternative to online subscription services like Rhapsody, et al., if it works as advertised. (I’m willing to assume that my, err, suboptimal experience won’t be typical.) In addition to lacking any fees or advertisements, it offers a host of different ways to check out tunes. You can listen to albums or songs on demand (although only Warner Music Group and related labels are available at this point), other users’ playlists, online radio stations and customized webcasts based on a particular artist. There are social-networking and music-sharing features, too, such as the ability to search through other people’s collections and send your friends links to tracks you like. (According to Nguyen, if you give a friend the track itself, your license to play the song will be revoked. The company plans to use watermarks in the files to maintain this one-licensed-user-per-song policy, which is an intriguing response to pass-along piracy.)

But where does this lead? If the on-demand features are compelling, why would people buy CDs? Nguyen argues that people don’t like to rent music, but that’s not what a subscription service (or Lala) is about. It’s not a cheapskate’s approach to collecting, it’s a different kind of musical entertainment -- a bit like radio except with more control in the hands of the listener. Lala has an interesting plan to reward active buyers with progressively lower prices for new CDs, but it also undermines the market by offering a trading platform for used discs. And its plan for downloadable music, while technologically ingenious, is fundamentally flawed. Lala’s DRM-free downloads will go directly to iPods, averting the locks in Apple’s iTunes. But the songs get trapped there, like insects in a roach motel. If you want a copy for your boombox or your laptop, you’ll need to burn the files onto a CD. You’ll probably find yourself ripping that CD into MP3 files just so you can have something that will work on all your devices, online or off. Oh and by the way -- Nguyen told the Wall Street Journal that Lala won’t sell individual tracks, just albums. That’s out of step with about 50% of the market.

Given the strengths and weaknesses of its plans, I could see a fully functional Lala luring more than a few music fans away from subscription services and webcasters. But I’d be surprised if it found a way to make more than $140 million in its first two years, which is the amount of royalties Nguyen said the service will be paying the labels and music publishers. What it may do instead is inspire more business models that give away music and sell something else.