Above C-level

What if I told you that you could listen to any song that you want as many times as you want for only 10 cents? Is that something you might be interested in?

In a change of heart from last month where I negatively reviewed SanDisk’s new digital music media, Lala.com is living proof that the music industry has hope. Their secret: lure you in for free and keep you there for cheap. The way LaLa works is the following: users may listen to any song one time for free from their library of over 6 million. If they wish, they can then pay 10 cents for unlimited streaming use of the song while online – this is called a “web song”. And then for an additional 79 cents, users can download an offline, DRM-free version of the song for their mp3 player of choice. Better yet, LaLa seamlessly integrates with iTunes, where the song is instantly delivered to the user’s music library.

It costs 89 cents to physically own a song via LaLa versus 99 cents via iTunes. But the slight price difference isn’t the kicker – instead it’s the 10 cent web song that is the real innovation. At a dime a pop, illegal downloading may finally have some competition. Of course 10 cents is no reason for record labels to jump for joy, but when you consider the fact that over half of today’s music downloads are illegal, it’s a sound stopgap measure. Furthermore, it’s a gateway to the incremental 79 cent purchase for outright ownership – a 20% improvement over perceivably overpriced iTunes when you consider the first 10 cent payment a sunk cost.

LaLa will not solve all that ails the music business, but it certainly has captured a creative revenue model to compete with iTunes’ number one download platform. Furthermore, as wireless internet becomes ubiquitous, online streaming music may render today’s mp3 storage devices (e.g. classic iPods) obsolete. If and when this disruption takes place, new entrants such as LaLa will be ready to step into the shoes of current mp3 retailers, rekindling the hopes of a quickly fading industry.