Online music service tries a new lure: 10-cent songs
The major record labels plan to start selling digital songs today for a dime apiece. The catch: You can’t carry them with you on an iPod.
Thomas Hesse, Sony BMG’s president of digital business and U.S. sales, came up with the new pricing approach for the “Web song” while in discussions with Lala Media Inc., a digital music retail store and service. The Web song is stored online and can be listened to only through a computer’s Web browser.
Sony, the three other major record labels and thousands of independent labels plan to sell Web songs via the revamped website Lala is unveiling today.
They hope customers will also buy, for an extra 79 or 89 cents, a version of the song they can download and transfer to portable devices or burn to CDs. But the 10-cent Web song demonstrates the willingness of the music industry to seek new revenue models in an era of declining CD sales.
“The psyche of the music industry right now is that not experimenting is riskier than experimenting,” said Michael Nash, executive vice president of digital strategy and business development for Warner Music Group, one of Lala’s investors.
Hesse said he wanted to give consumers a way to discover new artists and buy music in an inexpensive way.
“Let’s make as many attractive possibilities out there for legal consumption of music” as we can, Hesse said in an interview.
Many Web services offer free streaming of music, which the companies pay for through advertising. Lala too offers free streams of its library of 6 million songs, but it doesn’t run ads.
The Palo Alto company’s relaunch comes during a year in which entrepreneurs and big entities alike have started music services, each with its own twist and almost all with the full support of the major recording companies.
In September, News Corp.'s MySpace relaunched MySpace Music, a joint venture with the major labels, that gave users ways to stream and buy music. This month, Nokia began selling phones in Britain with its Comes With Music subscription service, which allows a consumer to download music directly to a cellphone.
Lala is on its third business model but remains afloat thanks to $35 million in financial backing from investors Bain Capital, Ignition Partners and individuals.
Lala began in 2006 as a CD-swapping site. In June 2007, it relaunched as a service that allowed visitors to listen to any song -- though only from the Warner Music catalog -- free of charge in hopes that they would then buy CDs. The company shut down that service two months later because it had to negotiate licenses with the major recording companies and independent labels.
As those talks took place over the last year, Bill Nguyen, the company’s co-founder and chairman, said he struggled to convey his vision that one’s music collection would one day be like e-mail, something to access any time, anywhere. The Web browser would be the new iPod, he said.
“Trying to explain that not only is the plastic CD dead but the MP3 is going to be dead, that’s a long conversation,” he said.
In June 2008, Lala opened up its new test site, attracting about 300,000 visitors. In addition to its Web song license, Lala has a deal with labels that lets it scan a user’s music library and offer the user those same songs via any Web browser.
That gives Lala information about a person’s tastes so it can target music suggestions. For new music, a person can listen to any song once free of charge before buying the Web song or the unrestricted version that can be transferred to an iPod or other digital player and burned to CD.
But Lala has its work cut out for it, industry analysts say. It has to rise above the din coming from all the new digital music services, big and small.
“Lala has been on a roller coaster ride since its inception,” said Susan Kevorkian, an analyst with IDC. “They keep taking risks and new directions. The hope is that they haven’t alienated users.”