CD Site Seeks Purchases Without Piracy

lala.com
Lala.com has 1.8 million CDs for trade, as well as a seller rating feature and recommendations.
By Mike Musgrove
Washington Post Staff Writer
Friday, June 9, 2006

A new online music service that allows users to trade music CDs for less than $1.50 may have found a way to tackle what has been the recording industry's biggest beef with online file-sharing: compensating musicians and performing artists for their work.

Lala.com, which made its debut at http://www.lala.com/ yesterday, allows members to trade CDs they no longer want for CDs that other members have listed for sale. Membership is free, and each CD trade costs the recipient $1.49.

Of that, some goes toward shipping costs.

Lala.com gets a cut -- and the company expects to generate revenue by selling information about its users' trading habits to record companies.

Finally, a new foundation started by the company to benefit performing artists will receive about 20 cents from every trade.

The record labels get nothing.

"Some [record companies] think we're really bad; some think we're really great," said Bill Nguyen, a Silicon Valley entrepreneur who co-founded the service.

Lala.com members build two lists on the site: one that names the CDs in their collections that they no longer want and another of CDs they'd like to have in their collections.

Nguyen said yesterday that his inspiration for Lala.com came from the band Fountains of Wayne and the record store Amoeba Music, based in the San Francisco Bay area, which buys and sells used CDs.

"Record stores have gone the way of the dodo bird. We wanted to create a great record store again," he said. "We're just trying to encourage people to try music; if you get people to listen to music again, there will be great long-term economic impacts."

For years, the recording industry has struggled with declining sales caused, in part, by the number of people who started trading tracks from their music collections over the Internet. The Recording Industry Association of America has been at the center of the controversy and has sued individuals involved in file-sharing.

A spokeswoman for the association declined to comment about Lala.com yesterday.

Nguyen said his service tries to address concerns about piracy and to deter members from feeding CDs into their iTunes collections and re-posting them for trade.

The service has built-in features to keep users from immediately trading the disks they have just received.

"If you really like something, keep it," Nguyen said. The service requests that users stop listening to an album if they have traded it away, even if they have already fed the music into their iTunes collection.

Lala.com also has a built-in rating feature called Karma that slows the flow of music to users who, for example, gain a reputation for passing along scratched CDs.

The music service is the seventh start-up for Nguyen, a Silicon Valley veteran who made his fortune with mobile e-mail companies. The company has received $9 million in venture capital funding, he said.

Lala.com said it registered 100,000 members during a closed trial version of the service that lasted three months. It has 1.8 million CDs available for trade.


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