Tuesday, June 5, 2007

Lala's plan sounds lulu!

Big story today in the "Marketplace" section of the WSJ on Lala.com's plan to offer consumers unlimited on-demand streaming of individual song files, on PCs, for free, while paying record companies big money for the privilege -- with the business model being that consumers will be inspired to buy album downloads for their iPods and other MP3 players in the process.

But the plan sounds, if I'm understanding it correctly -- how can I put this politely? -- mind-numbingly ludicrous!

First, the paper's Ethan Smith reports that Lala is paying major labels $6 to $8 per month per user -- "about the same wholesale rate paid by online music-subscription services like Rhapsody." There's no way... NO WAY!... Lala could make that much money in profit from download sales.

(Wait -- the AP's story on the same topic says that Lala is paying the labels a penny per song for on-demand plays. That's much more reasonable. (But, actually, that seems crazy-low for the labels -- why should I pay $12.99 retail for the new Bright Eyes album if, over the next few weeks, I can punch up the hit song a dozen times and the other songs five times each via an on-demand service? The label would lose their share of the $12.99 in exchange for only making $.62 . But I digress.) (But who's right? The Wall Street Journal or the Associated Press? One of the two reporters probably missed a "which works out to..." qualifier.)

(But could Lala make money at even the AP's "penny per song"? For selling album downloads, Lala would get to keep, what, 15% of the purchase price -- maybe $1.50? So at a penny per streamed song, streaming 20 songs per hour, they'd need a consumer to buy an album for every 7.5 hours of listening! Impossible!)

Second, the article says that Lala users, online, can listen to other users' iTunes playlists, all for free. Wait, okay I'm fine with that one; if the $6-8/month or the penny per track is paid, that's a kind of trivial bonus feature...

Third (back on track), "Lala gets around the copy-protection issue" of downloading music into an iPod by using a plug-in that puts the tracks directly onto the iPod, where they can never be moved! At $6.50 to $13.50 per album! Ludicrous!

Fourth, it's supposed to be appealing because you can download through a web browser without using the iTunes software. And the benefit to that is...?

Fifth, "Lala found Bill Nguyen...calls the Lala gambit an 'all-in' proposition, readily acknowledging that if it if fails, his company will most likely go under." Has he ever heard of market research or user testing?

Sixth, the final paragraph says that Lala already features an Internet radio service that "with their characteristically gung-ho spirit" (suck up much?) they built from scratch, spending weeks to rip 100,000 CDs bought just for the occasion. Nonsensical -- you can build hundreds of great channels of music with a fraction of that many CDs. Furthermore, if this actually exists, why can't I find it on the site?

Red flag: "After the installation has finished, lala.com will scan your computer for your music and upload the music to lala.com for access from any computer in the world. " (Is it actually uploading the music files? If Lala already has ripped 100,000 CDs, why does it need your copies? (This is like when Spock's half-brother tried to commandeer the Enterprise in "Star Trek V," allegedly on behalf of God, and Kirk asked, "Why does God need a starship?"))


Remember, Lala until now has been a glorified used CD store, without even the pretense that buyers might want to own the CD. In the previous scheme, users paid Lala $1 to get CDs (via a Netflix-like prepaid-envelope mechnism) they could rip to their PCs. Lala presented this as "artist-friendly" because they voluntarily donated a portion of that dollar to some artist-friendly cause. (It makes no sense to me that record industry would on the one hand be trying to enact legislation to kill used CD stores (http://stereophile.com/news/050707resale/) yet on the other hand, at the same time, get into bed with Lala.)