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Online service to try to sell music by offering it free

Lala will pick up the tab for streaming songs in hopes listeners will buy CDs or downloads.

June 05, 2007|Michelle Quinn | Times Staff Writer

An online music service is putting a fresh twist on selling digital tunes: It plans to let computer users listen to just about any song or album free, in hopes they'll buy music they like.

Lala.com launched last June to let music fans trade used CDs for $1 each. But the Palo Alto company is now preparing to pay millions of dollars in royalties to record labels -- about a penny each time someone listens to a song -- in pursuit of the notion that the more music people listen to, the more music they will buy as CDs or digital downloads.

The new service, which launches today, offers a host of free features to woo music lovers.

Lala will let users access their iTunes music libraries from any computer, check out the songs stored on their friends' computers and listen to albums they haven't purchased as many times as they want -- at no charge. And in what the company says is a first, users will be able to download music straight from the Web to their iPods.

You pay Lala only if you want to put music you don't already own on your iPod or if you want to buy a CD -- or soon, a digital download. That's different from subscription services offered by RealNetworks Inc., Napster Inc. and Yahoo Inc.

The service faces many hurdles, such as whether Lala can sell enough music to offset the streaming-music royalties it pays record labels. But if it succeeds, it could present a new model that combines free songs like those offered by illicit file-sharing networks with a compensation system for the recording industry.

"They're trying to jump-start digital sales by serving big fans who want to buy music rather than rent it," said David Card, a senior analyst at Jupiter Research.

"Since it's free, it can have a mass market. They are trying to bring back the Napster experience when it was free."

Bill Nguyen, one of Lala's founders, said the idea was to use the Internet in new ways to distribute, store and share music. Most people's digital music is tethered to one machine in their homes, whereas with Lala, their songs can follow them to any Web browser.

"This is what online music can be," said Nguyen, who named the company after his son's baby talk.

Lala has an agreement in principle with Warner Music Group that will allow users to listen to Warner's library of songs as often as they like.

"Lala is a promising platform that combines search, commerce and community in one great experience," said Alex Zubillaga, Warner's executive vice president of digital strategy and business development, in a statement.

Lala hopes to sign other labels soon. In the meantime, visitors can listen to a few songs by artists on other major and independent labels or listen to a Lala radio station that streams music over the Web.

Lala faces a tough road. The 23-employee company says it is not spending much on advertising and marketing, instead relying on users to tell their friends about the service. If the other major record labels sign up, Nguyen expects to pay $140 million in royalties over two years, but the company has announced only $14 million in financing so far.

"We need people to start buying music immediately," said John Kuch, a marketing and business development director at Lala.

Analysts said Lala needed to sign other labels quickly and to make the experience so easy that more people become comfortable getting their music online.

michelle.quinn@latimes.com

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