iTunes Rival Adopts New Strategy

An online music company is launching a new take on the MP3 business model: it's offering unlimited listening (from any Internet-enabled device) to a track for 10 cents. For LaLa, the group offering the deal, this is the third different method it's tried.

LaLa, which launched in 2006, began as a music business based on members trading physical CDs (originals, not copies), with LaLa charging a dollar to both parties as middleman.

Last year it changed the focus to online music, with streaming music available with permission of the publishers (though this feature didn't last long) and the ability to upload your own music collection and access it from any computer.

The new idea is to sell music through this system. Users can pay 10c to add a song to a personal 'locker' which they can then access online forever. However, there's no option to download tracks onto your own computer or MP3 player.

There are a couple of features which don't appear with most rivals. Users will be able to listen to any track in the system once without charge, unlike with iTunes which limits previews to 30 seconds. And LaLa has one of the widest potential ranges of music, with the support of all four major record labels plus a reported 70,000 independent labels. (Source: cnn.com)

Those benefits don't seem likely to overcome the system's weaknesses though. While LaLa insists we are close to the point where all music-playing devices have an Internet connection, that sounds an unlikely imminent prospect to me. In any case, there will always be situations where you simply can't get online, for example when riding the subway. (Source: cnet.com)

The economics seem questionable as well. LaLa will have to pay a royalty fee every time a website visitor plays a preview track, though the firm says that in a test run, the proportion of purchases-to-previews was easily high enough to cover these fees.

The other big problem is that 10c doesn't sound like enough to cover the fees record companies would presumably expect for unlimited streaming (the current royalty rate is 0.2c per play) and still let LaLa make a profit.