LaLa outperforms

My hat is off to LaLa. Nobody believed in it. It looked like they were going to get the hook, and now they have pulled a rabbit out of a hat. It’s magic.

Labels size up Web 2.0 music services | Digital Media – CNET News:

No [web 2.0 music company] has impressed more music execs than Lala.

Lala began as a CD-swapping service but now offers a hybrid business model. Lala enables users to upload their existing music libraries into Lala’s digital jukebox. This gives customers the ability to listen to their songs for free from any Web-enabled device. The company also gives visitors the chance to listen to all of the site’s music free of charge–one time. Lala then charges 10 cents for unlimited replay of each song. The user can then apply the 10 cents to acquire a DRM-free copy, which costs 89 cents.

The beauty of this is that Lala gets its hands on people’s credit card numbers and positions itself to generate impulse buys, ala iTunes. Paying 10 cents to listen to new music doesn’t sound very harmful does it?

According to a LaLa co-founder Bill Nguyen, among the users who have provided a credit card, on average they buy 180 songs for every 1,000 they listen to on the site.

“These are the kinds of numbers we like to see,” said one executive. “When you’re talking about the customer value, you have to preserve the retail model to some extent. The online ad business is not going to drive the customer value in this environment. We’re looking for a blend of monetized sampling and discovery and sales conversion.”

That’s what Lala appears to be delivering.

6 thoughts on “LaLa outperforms

  1. One of the things lala is really doing right is seeing themselves as a platform, rather than a single application, which makes them adaptable to shifting sands. This is demonstrated in the shift from cd swapping to uploading/streaming, and their acquisition of WOXY a few years back. Not sure why they sold WOXY just recently, but, ever shifting sands…

  2. I dunno, Piers. I’m not sure I’d give them that much credit.

    I think the product concept for the current app is fantastic, and they pulled off the execution nicely. But the WOXY thing and CD swapping project were all over the map. I’d credit them for boldness, good taste, and chops in the end, but at the same time it’s hard not to say that they barely pulled it out.

  3. Hmm, maybe I am giving them too much credit. One of the benefits of the WOXY thing was giving lala members access to WOXY’s digital catalog. Lala came off smelling like a rose, gained a loyal and vocal fanbase (also demonstrating good taste).

  4. They seem like they’re both kamikaze and talented. That WOXY trick is a little nuts and at the same time Lala turned it to their advantage, assuming that the resale didn’t kill them.

  5. It took me awhile before stumbling upon this article on your blog… but, isn’t this too much of a helicopter view?
    Will after the cost per stream & licensing cost been taken into full account still be “magical”? I like the hybrid model, but have serious doubts that Lala will prove to be a profitable and sustainable model. (and I haven’t touch on the R&D, HR cost etc)

  6. 180 transactions for every 1,000 free streams isn’t bad. If those are all streamed @ .2 of a cent, it costs a penny for 10 streams, and Lala seems to be grossing 2X that — 2 cents for every 10 streams.

    Does that sound right to you?

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