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LaLa, The Black Sheep Of Music Startups, Just May Have The Right Formula

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LaLa doesn’t get nearly as much attention as the other streaming music services, probably because they actually charge users to listen to music. Sites like MySpace Music, Imeem and Last.fm all stream music for free these days. But LaLa only lets you listen to a song once. After that, you have to “buy” it for ten cents to listen to it as many times as you like, and add it to playlists.

Seems like a non-starter, right? But wait, there are a few reasons why LaLa has a real chance at success. First, they have an absolutely exceptional user experience, which was completely relaunched in October (and we loved it). Unlike all of the other services, LaLa gets you to the music you want to hear as quickly as possible, whether it’s through search, browsing or suggestions from friends. Creating and embedding playlists is dead simple, too (see below). The other services mentioned above take more steps to find music. Last.fm is the worst interface, it’s very hard for new users to figure it out. And both Imeem and MySpace Music have their issues too – too many clicks to get to music, and MySpace doesn’t allow embedding.

http://www.lala.com/external/flash/SingleSongWidget.swf

Second, LaLa is completely advertising free. It lets you play any song once without paying. After that you have to pay $0.10 to add it to your collection and stream it whenever you want. But you get 50 songs free when you sign up, so users can get a feel for the service before paying anything. If you choose to download a MP3 of the song for $.89 (which is already cheaper than the other services), you get that $.10 streaming fee back.

Frankly, the exceptional user experience probably isn’t enough to compete with the free services. But LaLa also has its Music Mover client for Mac and Windows machines. Download it and it identifies all of the MP3s and paid iTunes songs on your hard drive and adds them to your collection on LaLa. You don’t have to pay the $0.10 to listen to those songs stream. What this means – you can listen to all that stolen music you’ve been gathering since Napster days on any computer with an Internet connection. You don’t have to worry about copying the songs from one hard drive to another to access them.

That sort of makes LaLa perfect. You can listen to all the music you already have, and then get new music recommendations from your friends. Listen to it once and then add it to your collection for $0.10.

They also have an iPhone app coming that lets you listen to all your music streaming on that device. No longer will you be limited to the small hard drive on your iPhone or iPod and forced to make tough decisions on which music to upload.

LaLa also has plenty of money to let the whole music scene shake out. While competitors lose money on every stream, LaLa has a business model that they say doesn’t burn cash. And they still have $20 million of unspent venture capital in the bank.

The company tapped former Yahoo Chief Product Officer Geoff Ralston as their CEO in late 2007, and his product experience shows. The company has the best streaming music product on the Internet today, and a business model that doesn’t burn cash.

Competing with giants like MySpace and possibly Facebook isn’t trivial. And those competitors will eventually catch up. But they have to serve a certain amount of advertising to make their models work, a handicap that LaLa neatly avoids. Don’t count them out any time soon.

It’s the joy of using products like LaLa that keeps me excited about startups.

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