Lala.com Bets Big on Free Streaming Music

CD-swapping service Lala.com is making a bold move this morning, opening up a revamped version of its web site built around free music streaming and a new service that lets you upload tunes to its site and access them from anywhere.

If you think that sounds a lot like the old version of MP3.com, you're on the right track. Download a plug-in and the service will scan your hard drive for music. If the tunes it finds are already on LaLa's servers, you'll be able to play them from anywhere right away. If not, the plug-in will upload those tracks in the background, and eventually you'll have access to them online as well. What's more, a nifty bit of iPod integration will let you fill up your music player directly from the web.

It's still early for the service, but I've tried it out and confirmed that it actually does let you stream songs it's found in your libraries. And if LaLa has an agreement with the record label (Warner was one of the first to sign up), you can even stream songs that aren't in your library. Things are a little slow on the new site so far, though, so I hope they get that worked out.

Eventually, LaLa plans to sell DRM-free digital downloads alongside the physical CDs they offer in partnership with Newbury Comics, and like other music synced to your iPod from Lala, those tunes will go right on to your player.

By now you're probably wondering how the company can possibly pay for this. (And believe me, you wouldn't be the only one.) Offering free music streaming amounts to giving away a service that Napster, Yahoo, and the rest want you to pay at least $6 a month for. LaLa's going to be giving away a lot of music streams over the next year or so, and the company assures us they're going to pay for all of it.

How will they do it? They're betting that if you give music fans free access to music and let them share playlists with friends easily they'll buy more CDs. And specifically they'll buy more CDs though LaLa. The math gets real interesting real quick: By all accounts, streaming music services are a low-margin business--most of the revenue they generate goes right back to the record labels. New CD sales, on the other hand, can make you some money. Even at the low prices they go for from web retailers.

So if you can average, say, one CD sold per user, per month... and if the profits from CD sales can actually pay the costs for streaming... and if that business generates enough new traffic to LaLa's already profitable CD swapping business... You see where I'm going with this.

Part of me thinks this idea raises as many questions as the Chicago Cubs in spring training (if Prior and Wood are healthy, and if Jones can start hitting again, and if Pie really develops...), but another part of me thinks it might just be crazy enough to work. We'll see, I guess. In the meantime, at least I've got a service that should save me from ripping music at the home and the office.

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