Lala: Taking Digital Music to the Next Level
It’s been a long road for Lala.com. The website, which initially started in 2006 as a CD swap-by-mail company, has switched focus a number of times in hopes of creating the next big thing in music distribution. While the company’s previous ventures have ranged from inconvenient to idealistic, it seems that founder Bill Nguyen has struck gold.
Lala combines the two major models for online music, adds its own charm, and charges its users less than any other online, ad-free service. Here’s how it works; create a free account on Lala.com, browse their library of over 6 million fully licensed songs, find a song and stream it once for free. Want to listen again? There are two options; either purchase the Websong for a mere 10 cents, or download the song directly to iTunes for 89 cents. A ‘Websong’ is essentially the same as the music files accessed through a subscription service; the tracks are added to the user’s online playlist and can be accessed from any device with internet access and a web browser. If a user later decides to download the same song for use on iTunes or his iPod, Lala credits the 10 cents from the ‘web song’ purchase towards the MP3 purchase, meaning that the user can download a DRM-free version for only 79 cents. This allows a “try-before-you-buy” approach that music lovers have never before experienced. If a ten-song album can be streamed online for $1.00, the user has the ability to listen to an album for an indefinite period of time before deciding if the album is worthy of entering his iTunes collection. As far as online music purchases go, Lala users can say goodbye to buyer’s remorse.
With downloads cheaper than iTunes, no monthly commitment like Rhapsody and a music library as large as both of its predecessors, Lala means business. But simply cutting down prices isn’t what makes Lala so convenient. The program offers users a Music Mover program, which matches songs on the user’s computer to its licensed catalog and adds those songs to the user’s online catalog for free. Without spending a cent any Lala user can create a fully licensed online playlist of their pre-existing music, which is, of course, accessible on any device with Internet access and a web browser. In a matter of two hours a 5,000-song iTunes playlist can be matched to Lala’s library, including songs purchased from the iTunes store.
The site also offers a social networking feature, which allows users to connect with others sharing their same musical tastes. Users keep an eye on what their peers are listening to and can choose to sample or buy the same music. The site makes individual recommendations, similar to iTunes Genius feature, and allows users to embed songs, albums or playlists on their Myspace and Facebook pages through a Lala application.
When Lala first announced its plan to test 10-cent streams in May, the concept was met with a great deal of skepticism, which was rooted in Lala’s music library, which was sparse at the time. Bill Nguyen was able to turn these jeers into praise in a matter of months by obtaining licenses from the four major labels as well as 170,000 labels and distributors. “It is a significant new model, and even more significant as a consumer proposition,” says Michael Nash, executive VP of digital music strategy and business development for Warner Music Group, which is an investor in Lala. “What I think is really interesting is the idea of virtual ownership—creating a value proposition that’s between the sampling of a stream and the purchase of a download.”
Nguyen’s creativity in this endeavor is not surprising. With seven successful startups on his list of accomplishments, Nguyen added former Yahoo chief product officer Geoff Ralston to his team earlier this year. Ralston was instrumental in creating Yahoo Mail, the website that made online inboxes an industry standard. With a team responsible for services like Yahoo!, eBay, Blogger and AOL, Lala seems to have found the perfect mixture of genius and opportunity.
During their test period from May to October, Lala disproved theories that 10-cent Websongs would lessen the possibility of MP3 sales. Between 30% and 40% of Lala’s 300,000 existing users bought Websongs and then ended up buying the full MP3. Nguyen explained his theory behind this model to Billboard Magazine a few weeks ago; “If the goal is to get consumers to buy more music, then the existing model of how it’s priced and sold doesn’t work. Look at subscription music. They pay for every single song that’s streamed, but they get a fixed revenue from the customer. So if you’re a big music listener, you actually may cost the service more money that it makes. Instead of a streaming access product, think of it as if it were a real product. It’s just virtual. It doesn’t have the bits, but behaves in the same functional way.”
Lala splits the cost of both Websongs and full MP3s with the labels and makes a greater percentage of the profits on the Websong. Marginal as those profits may be, Nguyen hopes to draw in users who are using illegal downloading or free music services like Myspace Music, reclaiming revenue streams that were lost during the Napster days. As a user, Lala may be the first model that is worth the low price because of its convenience and universality. The social networking features and emphasis on music discovery don’t hurt either.
As with any new music service, there comes the concern that Lala may be an unsuccessful model and that users risk losing the investments in their Websongs. While the risk is smaller than with previous services like Yahoo Music, Geoff Ralston recognized the concerns and responded frankly: “It’s a really fair question. What we need to put in front of customers is that we’re very well financed, and even in this time we have enough cash flow to last us for years with no revenue. We’re a very well financed company and we’re going to be successful.”
There is a palpable excitement in the tone of both the creators of Lala and the label executives who are strongly supporting the site. “This is the first time the industry has built a product for where they think things are going, and not reacting to what people have already done,” commented Nguyen. The team of web engineers at Lala is striving to maintain that focus, constantly updating their user interface. One more twist that Lala offers? Fifty free Websongs to any new user. Now that’s creativity.
By Tiffany Peon
Bruno, Antony. “Lala Introduces ‘Virtual Ownership’ Pricing Model.” Billboard Magazine 20 Oct. 2008. 30 Oct. 2008 .
Von Buskirk, Elliot. “Lala: How Does 10 Cents a Song Strike You?.” Wired: Listening Post 21 Oct. 2008. 30 Oct. 2008 .
. “Lala.” How it Works. 2008. La la Media. 31 Oct. 2008 .
. “Lala.” How it Works. 2008. La la Media. 31 Oct. 2008 .
. “Lala.” Blog. 2008. La la Media. 31 Oct. 2008 .
Bruno, Antony. “Lala Introduces ‘Virtual Ownership’ Pricing Model.” Billboard Magazine 20 Oct. 2008. 30 Oct. 2008 .
. “Lala.” About Us. 2008. La la Media. 31 Oct. 2008 .
Bruno, Antony. “Lala Introduces ‘Virtual Ownership’ Pricing Model.” Billboard Magazine 20 Oct. 2008. 30 Oct. 2008 .
Bruno, Antony. “Lala Introduces ‘Virtual Ownership’ Pricing Model.” Billboard Magazine 20 Oct. 2008. 30 Oct. 2008 .
Von Buskirk, Elliot. “Lala: How Does 10 Cents a Song Strike You?.” Wired: Listening Post 21 Oct. 2008. 30 Oct. 2008 .
Bruno, Antony. “Lala Introduces ‘Virtual Ownership’ Pricing Model.” Billboard Magazine 20 Oct. 2008. 30 Oct. 2008 .
