WMG Partners With Lala.com To Stream Free Music
June 5, 2007 at 5:49 AM (PT)
THE NEW YORK TIMES reports WARNER MUSIC GROUP has made a deal with Internet start-up LALA.COM that will allow anyone to listen to its music free, with the idea that doing so will drive music sales. LALA.COM is expected to announce today that it will make the vast majority of albums in the WARNER MUSIC catalog available at its site as audio "streams," which can be heard online but not downloaded. Although listening to those streams will be free for consumers, LALA.COM will pay WARNER a royalty each time a user listens to a song.
LALA.COM, which is now a site where music fans can trade used CDs for a fee, is hoping to make money by selling music, both in CD format and as digital files that it will send to IPODS without using APPLE’s ITUNES software. The site does not yet have similar deals with other labels, but the company’s founder and chief executive, BILL NGUYEN, said it was in talks with several.
For WARNER, the deal with LALA.COM has limited risk, because the label will make money from streaming royalties. But its priority is increasing sales of music, which have declined further this year. "The evidence we’ve seen is that a lot of people want to own music," said WARNER EVP/Digital Strategy & Business Development ALEX ZUBILLAGA.
LALA.COM, which has received $14 million from BAIN CAPITAL and IGNITION PARTNERS, will be under considerable pressure to sell music. NGUYEN estimated that the company would spend $140 million in licensing fees over two years, assuming the site attracts the 5 million users it anticipates.