lala (website)
| Lala logo | |
Type of site | Online music distribution |
|---|---|
| Headquarters | Palo Alto, California, USA |
| Owner | lala media, inc. |
| Created by | lala.com |
| URL | http://www.lala.com |
| Commercial | Yes |
| Registration | Required |
Lala is a Compact Disc trading website created by Silicon Valley enterpreneur Bill Nguyen. The service allows members to legally trade CDs by USPS mail for $1, create their own online radio stations, and buy new CDs at wholesale prices.
Lala donates 20% of all CD trading revenue back to the artist through a charitable fund set up called the "Z" Foundation. Lala also recently acquired independent, online rock and roll radio station, WOXY.
History of company and website
Lala is based out of Palo Alto, CA and is venture funded by Bain Capital and Ignition Partners. It was founded by serial entrepenuer Bill Nguyen.
The site launched in an invite-only beta phase on March 7th, 2006. It officially launched in open-beta on June 8th, 2006. As of December 2006 there are currently around 200,000 members registered on lala.com and over 500,000 CDs have been traded since the company's launch. The company has a staff of 23 people.
On Feb. 14, 2006, the site community forums were effectively shut down, and those who were deemed troublemakers were banned or suspended. The lala community now exists at www.lalaunderground.com.
Trading system
The primary function of the website is brokering trades of CDs between users. Trades are not made directly (that is, one user does not trade CDs with another), but using a credit system. The website maintains a database of nearly every commercially-available CD in existence from which users create a "Have List" (a list of CDs owned) and a "Want List" (a list of CDs desired); when a match between one user's Have and another user's Want list is found, the user having the disc is invited to send it to the user wanting it. Upon activating their uniquely identified shipping envelope, the sender is credited for a trade. This credit then allows the sender of the original disc to receive a disc on his Want list from another user via the same mechanism. The system has been criticized as one that fails to get users the entire CD package, and many anecdotally complain that the site is not worth the money because they are left with "orphaned" CDs or CDs with no back tray art that cannot be stored in traditional CD holders (as their is no "spine" to read). Site moderators have done nothing to combat this problem, relying instead on a sort of honor system.
Business model
The enterprise makes money by charging a fee for each disc a user receives (this fee has been $1 per disc since the website's inception). Upon signing up for the service, the user provides a credit card number which is used for subsequent monthly billings. New users receive a packet of prepaid shipping envelopes and plastic disc cases; new envelopes are provided as required while the user is expected to re-use disc cases from received discs when they send discs.
Limits are placed on the number of discs a user may have in transit in either direction at a given time.
The website recently added a "buy new" feature which allows users to purchase new copies of CDs on their Want list directly (with fulfillment handled by multiple partners).
Shipping costs
Unlike other sites which facilitate direct sales between users (such as half.com), lala pays shipping costs, which are recovered as an additional fee to the trade brokerage fee.
As the site initially launched, members used envelopes pre-stamped with traditional postage (a $0.65 postage stamp) and a $0.49 shipping charge was added for each received disc. In addition to the gap between the actual cost of envelopes and postage and the fee charged, this approach represented a significant potential for lost revenue, as members in possession of these envelopes might not use them or could misplace them, with the postage having already been spent. Another drawback to this system was that members often had to add postage if they were including CD cover art along with the CD they were sending.
Starting in July 2006 (August 2006 for existing members), lala revised its shipping guidelines and began charging $0.75 per trade for shipping in addition to the $1 fee. The envelopes now used are charged postage only when mailed, and are similar in design to Business Reply envelopes. The new shipping rate also allows for members to send CD artwork without worrying about having sufficient postage.
Legal issues
Lala's terms and conditions include a provision warning the user that it is illegal to retain MP3 files of a CD you have shipped. If you no longer own the CD, you no longer have rights to derivatives of the CD. Despite this policy, "rip and shippers" are believed to run rampant on the site, and some members have openly bragged about this practice.
The "Z" Foundation
The company also founded The "Z" Foundation, a non-profit organization. The "Z" Foundation will initially be funded with monthly contributions of between $10,000 and $50,000 from lala.com and its members (actual amounts may vary based on CD trading volume on lala.com.)
The "Z" Foundation will focus on providing health and dental care that is often inaccessible to working musicians. 20% of the trading revenue will be contributed to performing artists for this foundation, eliminating the middleman and allowing musicians to benefit from the secondary sale and trade market. [1]
Website specific terminology
- Aardvark: Means Art Work, the pamphlet and back cover of an Audio Compact Disc. Originally, pre-beta, lala only traded the Audio CD without art work. There was much discussion (unending debate) on the forums between those wanting art work and those not wanting art work. These discussions were called Art Work Wars. Many users tired of seeing Art Work in the subject of a Forum Posting started using the term Aardvark instead. The forums were ultimately shut down to quash discussion of this site flaw, and several long time members had their accounts deleted for questioning the lack of a sitewide art policy. The forums have been reinstated, but usage has declined significantly in the face of strict moderation.
- The aardvark wars spawned a lot of other terminology - but FART and BART got most of the attention:
- FART: Front cover art.
- BART: Back tray liner art.
- The aardvark wars spawned a lot of other terminology - but FART and BART got most of the attention:
- Lalalopes: The special envelopes La La sends in the starter kit, and then when required, to send CDs to other lala members.
- Rip and Ship: The illegal activity of receiving a CD, ripping the CD to a hard drive (capturing the audio information), then shipping the CD out to another user. As noted above, if you ship the CD, you must delete the files.
- 209'er: A lala founder or staffmember. "209" refers to the street address of lala HQ in Palo Alto.
- Karma: The mysterious lala algorithm that determines queue position to receive CDs and the number of ship opportunities presented.
Lala in the news
Nguyen and his website were highlighted in the news in October 2006, when Nguyen announced his investment in Internet-based radio station WOXY.
The investment allowed WOXY.com to go back on the air after a brief suspension of broadcasting. Both sites cross-promote the other; Lala promotes the station, and WOXY advertises music that is for sale (or trade) produced by some of the independent artists that WOXY features. [2]