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By Richard Siklos
New York Times, 4/2/06

A fascinating new entrant in the field is LaLa.com, a music-swapping site
introduced last month. Depending on where you are sitting, the LaLa concept
is either brilliant (if you are a music fan with a lot of CD's you don't
listen to, or if you are an artist) or terrifying (if you are a retailer of
new or used music, or perhaps even a music label).

Here again, the founders are not in it just for profit. Rather, their idea
is that despite all the cool new digital music services, well over 90
percent of the music industry sales are still in the CD format; most people
still have CD's and artists don't gain any benefit from the sale of used
discs. Many music lovers, the founders contend, feel disenfranchised by the
way music is sold.

So LaLa is essentially a CD-swapping site that matches people who want one
another's old CD's. It charges them a mere $1 a disc and provides the
postage-paid envelopes to send them in for 49 cents apiece. Out of each
dollar, the company voluntarily pays 20 cents to the performer on the
recording; there is no more a legal obligation to do so than there is to pay
General Motors a cut every time a used Chevy changes hands.

Bill Nguyen, the man behind several Silicon Valley start-ups, who is one of
LaLa's founders, said that the service might work just as well at a cost of
$4 a CD — still a quite a bit cheaper than a typical used CD on eBay or in
an East Village record shop — but that making money wasn't the point.

Like those of other purpose-driven ventures, the company's costs are
relatively low: it has only 17 employees at its offices in Palo Alto, Calif.
So far, the site has been operating by e-mail invitation only because Mr.
Nguyen and his partners want to build a strong base of music lovers, and not
just people looking for cheap CD's. Mr. Nguyen maintains that the site
already has 1.8 million album titles available for swapping. By comparison,
Amazon has more than one million different CD's available for purchase,
according to a spokeswoman for the company.

MR. NGUYEN expects to open the site to the broader public by the summer. And
no matter how successful the site becomes, he vows that it will not carry
ads for the music industry or for anyone else — except some links to
charities. Nor will the company sell singles, although it will sell physical
and download versions of entire new albums.

He also asks that LaLa members "do the right thing," as he sees it, and
erase from their hard drives and iPods any copies of songs from CD's they
have traded. "We did a lot of weird things that didn't make sense," Mr.
Nguyen said proudly.

Or, maybe they do. After all, the company did manage to attract $9 million
in financing from the venture capital firms Bain Capital and Ignition
Partners. Obviously, these investors believe that there is money to be made
in communal efficiency, just as CNET must believe in its purchase of
Chowhound or eBay in its investment in Craigslist.

Maybe the lesson for media companies is to keep your friends close but to
keep these friendly menaces even closer. As far as Mr. Nguyen is concerned,
pursuing his labor of love is enough reward in and of itself. "We just dig
music," he said. "Karma plays a role, man."

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Of those 1.8 million "titles" - I'm betting 50% are the falsely maligned "Monster" by R.E.M...

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