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Musicians Can Get Paid in the Secondary Market with LaLa.com

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LaLa.com is a startup that is currently running in beta. It takes some Netflix ideals, smashes them up with a little bit of Half.com, and they have a service that will allow the trading of CDs through their marketplace. Users sign up and list some of their CDs that they are tired of. They send them off to people who would like them, using LaLa’s prepaid envelopes. They earn credits so that they can request discs from other LaLa users.

home_lala_logo.gifThere is a $1 transaction fee per trade and an additional $0.49 fee for the envelope. So, at the end of the transaction, you have traded an old CD that you presumably did not want any more, for another disc at a total cost of $1.50.

It sounds simple and perfectly legal, but there are some logistics and legalities that will probably come into play. First of all, if you trade a disc away to someone else, it is your responsibility to delete any additional copies of the music that you might have made legally when you were the owner. For example, if you have a ripped MP3 on your hard drive or MP3 player, you should not retain that digital file when you no longer own the physical CD. I am quite sure that this type of piracy will be rampant throughout the LaLa community as people just rip and trade.

This is a problem with no solution, though. At this point, there is really no way for anyone to identify these people. And these people already exist. They rip their CD collections and then sell the lot of them on Ebay or through Craigslist.

While LaLa doesn’t have a solution to this problem other than to request that users do the right thing, they are going to an unprecedented step to ensure that artists reap some of the spoils. We all know that the people who lose out when people deal music on the secondary market (ie Bay, used CD stores, etc) are the artists and their labels. They only make money on the sale of a brand new disc. Labels and artists are obviously not cut into the profits of eBay or your local used record store. What LaLa vows to do is to set aside 20% of their profits to give to the artists whose music was traded through their marketplace. While this doesn’t solve the legality issues, it at least helps compensate the artists.

LaLa has raised around $9 million in startup capital, but it remains to be seen how successful they can be and for how long. Some risks to their plan include the shift from physical media like CD’s to the non-transferable sort of media like digital downloads. What will they do when there are fewer CDs around in the marketplace? They can’t easily enter into movies because Peerflix is already doing this kind of a business in movies. Speaking of Peerflix, how hard would it be for them to move into music? Probably not all that difficult.

LaLa has its work cut out for it in this business, but maybe with their artist-first attitude they can attract the sorts of users who will be loyal. That might be their only chance for success.

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About Craig Lyndall

  • http://www.jarretthousenorth.com/ Tim Jarrett

    Silly criticism, but–why no link to the service? Yes, lala.com is easy to type in, but give them a little link love if you’re going to review them.

  • http://www.filteringcraig.com FilteringCraig

    Good point. The only excuse I have is that the program is in a limited invite only beta right now.

  • http://www.switchdiscs.com Mike

    How do these companies get venture capital when there are already similar sites out there that are offering the same thing for free like SwitchDiscs.com?

    I think I’m going to go get some venture capital myself to help me start a online DVD rental website. Brilliant!

  • http://www.hitflip.de Johnneth

    It is funny how US-focussed this site is. I would expect blogs to be more open-minded. In Germany a much more advanced service has been existing called Hitflip. User trade not only der music-CDs there but also DVDs, audiobooks, console games and computer games.

  • http://www.lala.com Bill Nguyen

    Craig,

    Very fair analysis. The difference is ‘la la’ works. Join the service and you’ll see. We have more discs than anyone. We add a Wal-mart every 30 mintues and even more than Amazon has in inventory.

    Most relevant, we’re built for people that enjoy music. Expect full digital capabilities from us before launch in July.

    Regards,

    bill
    founder, la la

  • http://www.eclecticlibrarian.net/ Anna

    Craig any any four other people: I’ve got some invites I can hand out if you want them. Just let me know. My contact info is on my website.

  • http://www.Peerflix.com Jordan MacAvoy

    Great article Craig.

    I totally agree with Bill that you’ve done a “fair analysis” of current trends and some of the more interesting areas in this space. As you pointed out, it will be interesting to see how the artist first model works to curb any challenges La La may face. I like the nod that you’ve given Peerflix, especially since the notion of us moving beyond DVDs isn’t wholly unimagiable. For now however, we are going to keep a laser focus on the DVD market.

    Best wishes,

    Jordan MacAvoy
    Marketing Guy, Peerflix

  • http://www.eclecticlibrarian.net/ Anna

    Craig: Did you get the invite I sent you? How is it working out for you?