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…Except Lala’sToo Cheerful to Sing Music Industry Blues June 5, 2007

Posted by David Card in Media.

I was highly skeptical when Lala debuted its used CD exchange. For one thing, the company said it would set aside some portion of fees for the industry, but was always very sketchy about details. But now the company’s making a big bet, but one that most labels should be happy with. It’s attempting to match the PC-tethered offerings of a Rhapsody or Napster, but for free, and funding the royalty fees it pays with the margins it hopes to make on album sales. And so far it’s got Warner Music buying into the idea, including delivering iPod-friendly digital downloads. (A couple of good write-ups.)

Lala’s founder told me stats like these from Jupiter surveys (see Figure 11) convinced him that subscribers would buy enough music to make up the difference. Indeed, we see that paying subscribers and downloaders still spend more than the average music buyer, even on physical CDs.

Lala’s community oriented, but so far not as populated with as many engaged users as others, like LastFM. It’s trying to capture some of the feel of the original Napster: if you find someone’s collection you like, you can keep in touch. Its software is fairly bug free for a 1.0 release, though it had troubles scanning my collection and loading my iPod (with music I already owned). But it can’t touch the Rhapsody or Napster deep-dive discover and listen experience, yet.

I’m not wholly convinced there are enough margins in retail — even if Lala bills monthly to minimize the hit from credit card fees — to support the model. Or that Lala will be able to persuade labels to lower royalty requirements (its long-term goal). And the mainstream user is going to want singles, not albums, which Lala frowns on. But hey, things could change. And it’s the coolest use of a “P2P network” I’ve seen in a long time.

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