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.
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.