Lala follows where Mp3.com tried and failed

by Mathew on June 5, 2007

Online music service Lala.com — which until recently was aimed at trading music CDs — has remade itself in a rather dramatic way by launching a free music-streaming service that automatically syncs with your iPod, and by signing a licensing deal with Warner Brothers Records. As Gizmodo describes it, Lala scans all the music you own — whether it’s from ripped CDs or downloaded music in iTunes — and then lets you listen to it anywhere (streaming through your Web browser) for free. In other words, it assumes that you own it. Lala founder Bill Nguyen has a string of startups on his resume, including Onebox.com, which he sold in 2000 for $850-million.

snipshot_e41go5nj2pnd.jpgIn addition to the free streaming service, Lala has a pay-for-download store, which (at least to begin with) will be selling only albums — for between $6.50 and $13.50 each — rather than individual songs. Lala is clearly hoping that the appeal of free streaming will convince users to adopt the service and then they will be more likely to buy music there as well. As an added feature, Lala has also developed a way of letting you “sideload” music into your iPod through your browser, without having to download it and then import it into iTunes. The service apparently only works with iPods.

It will be interesting to see whether Lala’s streaming service gets slammed by the major record labels (apart from Warner, of course, which seems to be willing to take a leap of faith that it will lead to more downloads). Michael Robertson, the serial entrepreneur behind services such as The Gizmo Project and Linspire — a Linux-based alternative to Windows — tried something similar several years ago with Mp3.com and was effectively shut down by legal threats from the music industry.

His service allowed you to put a CD in your computer, have it scanned and then immediately listen to the music from it without having to rip and upload it all to the company’s servers (Mp3.com ripped CDs and created a library of songs). Lala’s service is slightly different in that someone has to upload the songs — but each song only has to be uploaded once. Fred von Lohmann, a lawyer with the Electronic Freedom Foundation, says this may help protect the service from legal attacks.

“This is different from what MP3.com was up to with BeamIt (and for which they were sued) because the *initial* copy is uploaded by the users. MP3.com made the initial copies themselves.

Why does this matter? Because of the DMCA safe harbor that applies to hosting material on behalf of users. Pretty clever lawyering — wish I’d thought of that back in 1999.”

A more recent service Robertson launched called AnywhereCD lets you buy a CD and immediately download the tracks as non-DRM-protected mp3 files (the CD is delivered by regular mail). Although the service had a licensing arrangement with Warner Brothers, the record label forced AnywhereCD to remove its music by filing a lawsuit against the company (AnywhereCD has counter-sued). AnywhereCD also allows you to “sideload” songs into your iTunes, into a locker at another Robertson-owned music service called Mp3tunes.com or onto a mobile device.

Lala’s bet is definitely a risky one — and an expensive one: the company, which has raised $14-million from several venture capital groups including Bain Capital, says it expects to pay more than $140-million to the record industry over the next couple of years, and admits it will likely lose about $40-million in the period. Sounds like a great business model, doesn’t it?

In the end, Lala faces the same challenges as any other music service (apart from the dumb name, of course): will it be able to offer enough variety and selection to appeal to enough users to make it worthwhile? To me, one of the big issues is the album-only part — I think people have gotten a little too used to buying individual songs for that to fly (I know I have). It also remains to be seen whether Apple will get upset that the sideloading feature effectively bypasses its iTunes software (Susan Kevorkian of IDC says Apple may be just fine with it).

Would free streaming and the sideloading feature make you likely to try Lala? Jupiter Research analyst David Card has some thoughts here, and Liz Gannes at GigaOm says Lala should be congratulated for taking a risk.

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