Searching For a Business Model in La La Land: Lala Tries Again With Another Music Service

imageAt least you have to give it marks for trying…again and again. Lala, the three year-old polymorphous online music startup that started as a CD swapping service and changed its business model twice and then almost closed down, is now launching a new online music streaming service, with a twist. The new service works like this (and if I have to use bullet points to explain it, you know what that means for consumer adoption):

— The site first analyzes a user’s existing music collection on their PC, and creates an online virtual locker of all their songs, which can be played as streaming songs online for free. Sounds similar to what MP3.com tried eons ago and got sued out of business.
— Songs not in user’s collection can be streamed once free, and then for 10 cents, streamed unlimited times online.
— For downloads, prices are similar to iTunes and Amazon (NSDQ: AMZN), but that 10 cents in streaming can be credited towards an MP3 purchase.
— It has signed on all four major labels, and four major labels, and over 170,000 independent labels and distributors.

Competition is heavy, from much more high profile (and free) ventures like MySpace Music, imeem, Rhapsody and many others. Having a $20 million in investment from Warner Music Group does help though… WMG is also an investor in imeem, by the way. To make this model work, the company tells NYT that it will have to convince about 3 to 4 percent of its customers to pay for music. Lala splits the cost of both the 10-cent online streaming and the full MP3 with the labels, and makes a greater percentage on the online song, reports Billboard.

WMG’s Michael Nash, EVP of digital music strategy, hypes it up big time in the Billboard story, but with $20 million sunk in, he has to.

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