A new US based digital music service entered the market yesterday offering unlimited free online streams and, possibly, DRM-free music from Warner Music, a major that until now has been something of an advocate of the use of digital rights management technology to protect its music.
The new service is called Lala.com, and has been set up by Bill Nguyen, the founder of mobile technologies firm Seven Network Inc, and is backed by Bain Capital and Ignition Corp. The service will enable users to listen to full track streams of music on demand free of charge without adverts, the logic being that the free jukebox service will encourage users to buy downloads of the songs they preview. Lala.com will sell downloads in a yet to be confirmed iPod compatible DRM-free format, although, unlike most existing download platforms, it will not sell individual tracks, but full album downloads, which will sell for between $9 and $12.50.
Nguyen admits that the cost of providing the free streams, which it will have to licence from the record companies, will be significant, telling Reuters he anticipates losing $40 million in the next two years, but he believes that in the long term that investment will be recouped through download sales, even though he expects the majority of users to use the free service without actually buying any music. He told Reuters: "We expect up to 70 percent of people will be freeloaders just listening to the music but around 30 percent will be buying music". That 30%, he reckons, will be enough to make the business viable.
There will also be a social networking and peer recommendations aspect to the new service - plus users will be able to upload their own existing non-DRMed digital music collection up to the new venture's servers and listen back to it through the Lala.com jukebox service (which is quite clever, because it means that the large gaps in the new venture's jukebox catalogue at launch are overcome by allowing users to integrate their existing digital record collections into the service - for personal use only, obviously).
Warner Music are the first major record company to actually sign up to Lala.com's stream and download service, with their artists populating much of the jukebox site at the moment. This is possibly big news given that the website says it will sell downloads in a DRM-free format, and Warner have so far resisted such formats. However, it seems the Lala.com service will be set up to download tracks directly to an iPod, rather than initially to a user's computer, therefore reducing the risks of that unprotected music file being shared online, which is possibly why Warner have agreed to get involved.