Lala – interesting business model for online music

By October 21, 2008 25 Comments

Regular readers will know I have long been a believer that music is heading into the cloud and that over time the dominant delivery model will be streamed with monetisation coming either via in-stream audio ads or subscription.

I have just read about an alternative model from a company called Lala which could be more compelling – pay a deminimis amount to own a ‘web copy’.  On their site you can listen to any track once for free, but if you want to listen a second time you have to pay 10 cents (site not available in the UK yet 🙁 so I don’t know what it will cost here).  After that you can stream the song as many times as you like, although you can’t download it – i.e. you own a ‘web copy’.

It could well be that 10 cents is small enough that people simply don’t worry about it and frequently click to add songs to their web portfolio.  As a user that would be better for me that either paying $10 per month subs or putting up with ads.

Maybe ‘deminimis’ is the new free?!?

Coming back to music services; business model is only part of the battle of course, with user interface and catalogue being the other two important areas.  They apparently have agreements with all the major labels and on a quick test of catalogue for obscurish UK indy bands Lala did OK, but I haven’t been able to see the UI.  What I can see is that they have done some clever things to help people get started – e.g. 50 free web songs when you sign up and ability to import all the MP3s on your hard drive into your web album for free.

This last point is potentially very significant and according to Techcrunch was a hard one for them to get agreed with the record labels, but it leaves me wondering how much revenue they will succeed in generating.  At 10 cents per track added I’m guessing for mainstream users the average revenue per year will be pretty small.  To get near the $10 per month subscription cost you would have to be adding 100 songs each month, which seems like a lot to me.