August 2, 2006 5:53 PM PDT

Report: La La a threat, but labels should hold tongue

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Consumer sites adopt barter model

January 20, 2000
An analyst report calls La La a savvy new music site for helping people swap CDs via the U.S. Postal Service. But, the report notes, the company is also a highly effective way to pirate music.

La La allows music lovers to find used CDs on the company's Web site and then order them from their owners, other La La members. The discs are then mailed from one party to the other. What may alarm some music-label executives is that many CDs lack copy protections, and there's nothing to prevent songs from being converted to MP3 files and spread across the Web, according to a report issued by IDC analyst Susan Kevorkian.

The same is true in the case of brick-and-mortar used-CD stores, but "those stores lack the potential scope of La La," Kevorkian said in her report. "This perceived threat will only grow as La La's community does."

Calls to La La were not returned.

After years of combating piracy, executives from music labels are likely to be wary of any service that promotes sharing, regardless of whether the music is on MP3 or pressed to a CD. People have swapped albums and CDs with friends for decades, but the difference now is that the Internet and PCs make it easy for a host of strangers to locate and trade with people who have similar musical tastes.

At La La, those ordering a CD pay $1.75 ($1 goes to La La for brokering the swap, and 75 cents covers postage). Once users ship a CD, they're entitled to order one for themselves, and similar to Netflix, La La provides packing materials. La La's foundation is the company's search and recommendation engine, designed to connect members with similar interests in music, Kevorkian wrote.

"La La seeks to re-create online the experience of shopping in a local music store," said the report, "where casual music-information sharing with other music buffs and knowledgeable salespeople drove sales for the retailer."

During the dot-com boom days, several companies, including Swaprat and Swap.com attempted to launch bartering services but most didn't survive the Internet meltdown.

When it comes to mitigating the illegal copying of music, La La is approaching the problem in a new way. First, the company is offering to pay artists 20 percent of the company's CD-trading revenue through the La La's Z Foundation. This means that La La will be among the first to cut artists in on profits from the sale of used CDs. And La La also sells new music, which could go a long way toward appeasing record companies.

Finally, with all the illegal distribution of music on the Web, the threat La La poses is insignificant, Kevorkian said. Kevorkian warns record companies to expect some La La users to make unauthorized copies. But the smart play, she says, is to embrace the service.

"The music industry would do better to develop La La as a distribution and marketing channel for new CDs and digital downloads," Kevorkian wrote.

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4 comments

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The wave of the future...
Mark my words... you will eventually be required to pay for a song everytime you listen too it. Since the act of listen is actually a wireless download from the speakers to your brain.

Of course, if you can only make 2 copies like today, then at least we won't get a chance to realize how bad today's music really is.
Posted by umbrae (1073 comments )
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music industry will embrace d/l music
they now will see regular CD's as a threat to their business model due to sites like this as well as the origional method of swapping with friends and used stores.

They will see that d/l music files can at least be drm'd to only play on ONE PERSON's system and so they will eventually do an complete 180 and insisit that physical CD's be 'the bad guy'....

sidenote: even though the federal (US) law and laws in other countries already provide payment to them of x cents per blank cd sold.
Posted by The user with no name (259 comments )
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lala
I am a member of lala, and just heard about the story you wrote. I am outraged! Although there is always the possibilty of people not erasing the music from all their media files, it's not as if all people who are lala members are music pirates, as you make all of us out to be. There is good that comes out of it, unlike the ol' Kazaa and others where it's just all free and illegal. We, as lala members are encoruaged to erase all files of the music we are trading, and until the day a company can access every music holding device we own--never--and erase it all for us, piracy will never be completely obliterated! It is not the fault of lala or it's other law-abiding members that certain other nonlaw-abiding members do not partake in the erasing procedure. But, at least they ALL have to pay their trading bill at the end of each month and that small percentage of profit goes to it's rightful owner...the music labels!
Posted by submersedincheese (1 comment )
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At Last My Review Is Coming Together
I agree with this report 100%. As I started using LALA.com during their Beta period in June to review I noticed very quickly how this site could be a illegal music trader heaven.

Once my review about LALA.com was posted to the Internet there were a number of users acting like this would never happen via LALA.com due to the $1.49 fee there is to trade on LALA. Well after a month of LALA.com being released CNet News is already talking about the same issues I brought up that still seem to not be pervented from happening on LALA.

Thanks CNet for backing up my facts.
Posted by WI Tech Guy (1 comment )
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