[Infowarrior] - Latest threat to music industry: CDs

[Richard Forno]

Report: La La a threat, but labels should hold tongue

By Greg Sandoval
http://news.com.com/Report+La+La+a+threat%2C+but+labels+should+hold+tongue/2
100-1027_3-6101595.html

Story last modified Wed Aug 02 20:30:50 PDT 2006

An analyst report calls La La a savvy new music site for helping people swap
CDs via the U.S. Postal Service. But, the report notes, the company is also
a highly effective way to pirate music.

La La allows music lovers to find used CDs on the company's Web site and
then order them from their owners, other La La members. The discs are then
mailed from one party to the other. What may alarm some music-label
executives is that many CDs lack copy protections, and there's nothing to
prevent songs from being converted to MP3 files and spread across the Web,
according to a report issued by IDC analyst Susan Kevorkian.

The same is true in the case of brick-and-mortar used-CD stores, but "those
stores lack the potential scope of La La," Kevorkian said in her report.
"This perceived threat will only grow as La La's community does."

Calls to La La were not returned.

After years of combating piracy, executives from music labels are likely to
be wary of any service that promotes sharing, regardless of whether the
music is on MP3 or pressed to a CD. People have swapped albums and CDs with
friends for decades, but the difference now is that the Internet and PCs
make it easy for a host of strangers to locate and trade with people who
have similar musical tastes.

At La La, those ordering a CD pay $1.75 ($1 goes to La La for brokering the
swap, and 75 cents covers postage). Once users ship a CD, they're entitled
to order one for themselves, and similar to Netflix, La La provides packing
materials. La La's foundation is the company's search and recommendation
engine, designed to connect members with similar interests in music,
Kevorkian wrote.

"La La seeks to re-create online the experience of shopping in a local music
store," said the report, "where casual music-information sharing with other
music buffs and knowledgeable salespeople drove sales for the retailer."

During the dot-com boom days, several companies, including Swaprat and
Swap.com attempted to launch bartering services but most didn't survive the
Internet meltdown.

When it comes to mitigating the illegal copying of music, La La is
approaching the problem in a new way. First, the company is offering to pay
artists 20 percent of the company's CD-trading revenue through the La La's Z
Foundation. This means that La La will be among the first to cut artists in
on profits from the sale of used CDs. And La La also sells new music, which
could go a long way toward appeasing record companies.

Finally, with all the illegal distribution of music on the Web, the threat
La La poses is insignificant, Kevorkian said. Kevorkian warns record
companies to expect some La La users to make unauthorized copies. But the
smart play, she says, is to embrace the service.

"The music industry would do better to develop La La as a distribution and
marketing channel for new CDs and digital downloads," Kevorkian wrote.


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