In a bizarre amalgamation of virtual and physical business, the dying independent terrestrial turned internet radio station WOXY is being revived by online CD swapping service Lala. Lala is tangible evidence that online music doesn’t have to kill the CD industry. At first I was skeptical, but after spending more time on the site I think this radio strategy is very smart. See also our previous coverage of the company here.
Lala users identify CDs they want mailed to them for $1 plus 75 cents shipping. Other users who have those CDs available for swapping are notified and put them in the mail. Lala keeps the dollar and donates a portion of it (as much as $50k in a month so far) to a Foundation that supports artists. Users can also chose to purchase CDs for immediate delivery.
Now the company is taking over WOXY to allow users to create streaming radio stations that will in turn inspire CD swapping and purchases. Station listeners can click to request a swapped or purchased CD that a streaming track originates from. The music available for creating the radio stations is licensed from a third party. Lala plans to invest between $5 and $10 million into the station. The company received $9 million in funding from Bain and Ignition last year.
It appears that Lala is quickly gaining traction with users. The company reports about 10,000 CD swapping transactions per day. Comments left on the site appear in numbers that many publishers would be envious of. The company says CD sales have been doubling monthly and hit gross margin profitability last month. Only 2% of CD swapping transactions result in complaint reports and users are rated in a karma system.
Perhaps the strangest thing about Lala is a delusional, yet legally required, request that participants delete digital copies of music from the CDs they mail away in swaps. I’d be curious to see how often that happens.
Internet radio licenses open a number of interesting, if legally tricky, possibilities like this. See also Faces.com, (our coverage) an Australia based social network that combines user playlists, online music sales and an internet radio license. (Disclosure: Faces is a TechCrunch sponsor.) See also our coverage of Swaptree if trading physical objects is your thing.
I think I like Lala, though the integration of CD swapping, music purchase, internet radio and DRM compliance is taking a while for me to wrap my brain around. Apparently that’s not the case with Lala’s growing user base though. This is definitely a company to watch.
















Comments
very cool new addition
Haven’t realized that lala is doing so well until I read this post. Amazed at their execution.
is that new? see: http://www.hitflip.de
‘Perhaps the strangest thing about Lala is a delusional, yet legally required, request that participants delete digital copies of music from the CDs they mail away in swaps. I’d be curious to see how often that happens.’
this IS strange. i use lala occaisionally and there is NO way i’d ever delete copies and i can’t imagine anyone else doing so. in addition, with lala, you can opt to keep a lossless copy in addition to a lossy one (hard drives are cheap man!)
i love what these guys are doing, but because of this incongruity, i think they are going to have to amend this model some when the riaa gets really serious about this… its less convenient than allofmp3 but cheaper (for lossless music).
I did a podcast interview with John Kuch of LaLa.com last month if you are interested in hearing an audio dialogue about LaLa.com and the Z Foundation (the charitable foundation that LaLa is making donations to). My podcast has a nonprofit slant, but there’s plenty of background info about LaLa in the interview also.
@tommyboy –> this IS strange. i use lala occaisionally and there is NO way i’d ever delete copies and i can’t imagine anyone else doing so
you’re stealing…plain and simple, but you’re right.
when i lived in japan you could rent CDs, of course you’d copy them and return them…America was big in trying to shut that down in trade talks…it effectually happened; though, you may be able to rent a cd somewhere…strange you can rent dvds, games, etc, but rarely have i seen music being rented.
anyway… I hate the name LaLa…and second i live in the san francisco, which means i have easy access to Amobea (spelling?)
Thanks for stopping by Corey - your podcast rocks!
why isn’t this being shut down? this is napster part 2.
hey, i’ll start a site where you can swap DVDs for 1 buck each. No worries, you can watch it, save it, burn it, whatever…
wtf, i’ll start a site to sell crack.
illegal is illegal. someone needs to bust their ass.
From a copyright standpoint, I don’t see how la la is any different from a bricks-and-mortar used CD store, or my local public library for that matter. I can just as easily walk into one of those places, buy (or borrow) a CD, rip/copy it, and sell it back to the store when I’m through.
I agree with Crunchy. The RIAA doesn’t sue libraries for potential infringement when lending CDs. I think they would need tangible proof of piracy, which was easy to find when users funtioned as nodes with huge song libraries and only owned a couple CDs.
Glad to see you’ve come around on lala. Also very cool to see my radio station on techcrunch!
Despite this glowing review, LALA is filled with many many problems and is very far from perfect. For starters, because LALA never actually handles any of the traded cds, there is absolutely no quality control or consistency. All the cds are obvisouly used, some are scratched, some are stained and most are missing artwork (tray art is not required by LALA). Also, because it is left up to other anonymous people to send you your requested cds, there is a huge inconsistency in the amount of time it takes for the discs to arrive to you. Some discs arrive 5 days later…some arrive a month later and some never arrive.
Another problem is because the condition of cds is so subjective, people may mark cds sent by you as Broken and Unplayable for whatever reason they feel, some users on LALA even mark perfect discs with missing artwork as Broken which affects your “karma” rating and limits the amount of discs you can receive.
The database of available cds to trade and receive is also very limited, updates to the database are extremely rare and far between.
Despite LALA’s claims of over 100,000 users, the actual number is actually much smaller. I recommend staying away from this service for some time until LALA proves it can fix the current problems, if they ever do at all.
There are numerous services just like LALA already out, who have better more effecient systems and friendlier communities.
Care to name them? Lala has its problems, but I would not consider their database limited in any way. Sure I’ve run into CDs I own that aren’t listed, but not many. And I have my share of obscure CDs. Your skepticism about the number of users on lala seems odd too. They are claiming 10,000 trades per day, seems consistant with a 100,000+ member list to me. As for CD quality, of course that’s dependent on the rest of the users and is subjective. I’ve very anal with my CDs, and have all artwork. I’ve only received a couple of CDs that didn’t meet my criteria (2 didn’t have tray artwork, a couple were a little dirty and scratched, but all were 100% playable). As for karma, it’s really nothing to worry about unless there’s a pattern in the way your sent CDs are marked (many marked unplayable, without art, broken, etc). As for length of time to arrive, of course time will differ. You can’t tell exactly when the sender actually sends the disk, and some will come from 10 miles away while others from 4000 miles away. It’s common sense that delivery time will vary. If it never arrives? Mark it so, and lala credits you. Like I said, I’m not denying it has problems, but all the ones you mentioned seem more like common sense things that you’ll find on any such service, rather than actual problems.
Lala seems to have something pretty powerful so long as they can control the quality. It is natural for any third party ecommerce site to have issues at first, but with the plan they seem to have in place things will naturally improve. Just like with eBay, the more regular users there are that care about their reputation the better things will be.
As for the illegality, maybe I am missing it, but seems legit to me.
WormInBuffet - Ever heard of a Used CD/Record store? This is the exact same thing. It is 100% legal, not even an iota of concern that it isn’t.
hyper - Is LaLa perfect? No. But you vastly overstate their issues. Lala takes all of the risk so if their are bad traders you are not punished but rather they will punish/kick out the bad traders. They are keeping track of users who report a suspiciously high percentage of “bad discs” received. You can request that you only receive CDs with artwork if you so desire. Any bad discs you receive can be marked as such and you will get another one in the future at no cost. Finally, although their database is not exhaustive its pretty damn sufficient, for me at least it had all but 2 of my 150 discs.
I use Lala a fair amount and my only complaint has to do with user apathy (not confirming receipt/not sending promptly) and often slow USPS delivery (first class mail should not take as long as it _seems_ to). It is the best deal in music, far better than Itunes or Rhapsody, and the selection is rather amazing for user-defined availability of CDs. What is interesting is the business model. If they are truly profitable (on a gross basis) at $10,000 a day (annual rev of $3,650,000), then this could be something really interesting, especially since this business is easily scalable. I do not see a real exit strategy, unless there is some consistent subscription model that generates steady predictable revenues a la Netflix. The similiarities between the 2 companies is pretty evident when you look at their mailers.
I do not see how the RIAA touches this at all. These are physical CDs that are/were owned by Lala members, and they can do whatever they want with them. Secondly, copying of CDs for personal use is totally legal.
One of the posts above is confusing the CD-Swapping model of lala.com with the music sharing model of Napster, they are not the same.
http://www.bookmooch.com does the same for books. You swap your books for your inventory for your wish list. You should take a look at this site. It really is fantastic.
i am a very satisfied with my LaLa experience. i have received a few with no tray cards but NOT ONE with scratchs or at all unplayable.
as for the people that say they can’t see anyone not copying and keeping a copy, i don’t. i see it as theft and i don’t condone stealing from artists AND record companies (….the people that work in the biz don’t make anywhere near the amount of money most people think, though artists don’t get a fair share of their profits and some labels are unscrupulous….but this is another rant all together.) i am offended by people that write off theft so easily. LOTS of people work hard for that music and to get it out there. but hey, if you can sleep then i guess who am i to condone you….thief.
and even those that keep some songs off an album and send it off to someone else is not that big of an issue thanks to the Z foundation. that direct contribution to artists outweighs some stealing (though i still haven’t found cause to do it)……
if this company maintains its altruistic intention it will be amazing. this is a win/win form of consumerism.
Hi All,
First of all, this is a really great conversation, and I’m happy to see the interest in Internet barter.
I wanted to chime in because I have been in the online barter industry since 2003, co-founding a swap site that is live today.
I think the major point here is simple: CDs are basically the only item that is mainstream, and that you can trade away and yet still have - plain and simple. The very notion that people are erasing their burned copies of CDs when they trade them away is ludicrous, and Lala surely knows that. On the other hand, put yourself in Lala’s shoes - they don’t care and why should they? Just because they are giving users the ability to legally trade items, and these same users are using the system to steal, is not the fault of Lala - just like another user mentioned above that the same thing can be done by selling CDs back to a brick-and-mortar store.
However, and this is a big however - one must assume that anyone who decides to get into the CD trading business, online or off, recognizes that CDs are particularly well suited to trading because of the ease in copying - plain and simple. In the end, Lala gets a bonus with the ease of copying, and the thieves are able to rob another person. Thieves are thieves, and I’m sure there are plenty of people using Lala appropriately as well.
Ok, all that aside, there is another issue at hand, and that’s the inventory. I signed up to Lala and was able to right away get a CD off the system, with absolutely no guarantee, agreement, or otherwise that would compel me to send a CD off in return. Yikes - that’s bad!! … That means that now, someone who earned trade points or “karma” (as is used on Lala) is now less one CD of a selection on Lala to choose from. Extrapolate that over the entire system - compound every day - and you get a lot of karma, and no items to get in return. This, I would argue, is the single most important issue to consider when looking at Lala, and any barter community. Specifically, the “karma” issue in Lala is just amusing, as there is absolutely no transparency on the system, and users have no idea what they really have earned, what the status of the economy is, and what they could possibly get in return both now and in the future.
Systems such as Lala are almost like a Ponzi scheme, relying on a steady flow of new users to keep the inventory looking good, when all along there is a buildup of points, with less and less items to spend them on.
If Lala is planning on charging $1.00 per trade, and then using profits to replace stolen items to keep the watering of karma down, then I feel really bad for the VCs who gave them 9M in venture funding.
We created our swap site to be a stable online economy, and the sad thing is that when services like Lala flame out because of the problems I mentioned above (and many more I haven’t touched on), they will ruin the reputation of Internet barter for the few companies that are doing it responsibly.
Just my $0.02.
Nice..nice post.
Hi,
http://www.radioguide.fm has a similair way of approach I figure.
GR
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