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[Chris McConnel]

Online music service to let users swap CDs

By Sue Zeidler Tue Mar 7, 3:15 PM ET

LOS ANGELES (Reuters) - A new online music service called La la Media Inc. aims to offer full-length CDs for $1 by letting members trade used physical discs, in a new twist on the popular but legally challenged practice of online song swapping.

Backed with $9 million in funding by Bain Capital and Ignition Partners, La la works like an online music co-op by enabling members to trade physical CDs they own for physical CDs they want, Bill Nguyen, co-founder of La la, said ahead of the Tuesday announcement.

With 1.8 million album titles available, members trade the CDs in prepaid envelopes, much like popular mail-order DVD service Netflix Inc. operates.

La la said it is talking with the world's major music labels to obtain licenses for the sale of digital music.

La la said it enables members to buy a physical CD new if they cannot get it for trade and also hopes to eventually offer digital album downloads at retail prices.

It does not plan to offer digital downloads of singles.

Officials for the major labels -- EMI Group Plc, Vivendi Universal's Universal Music, Sony Corp (NYSE:SNE - news).'s and Bertelsmann AG's Sony BMG, and Warner Music Group Corp. -- either declined comment or were unavailable.

A spokesman for La la said it expects 30 percent to 40 percent of its revenues will come from trading, with the rest to be obtained through sales of physical CDs, through a deal with CD distributor Baker Taylor, and eventually from digital downloads.

La la founders argue that, unlike underground online file-sharing services, which have been sued for copyright infringement, La la is protected under an exception to the U.S. Copyright Act. They contend that the owner of a CD can transfer a legally acquired copy without permission or payment of additional royalties.

A member will pay $1 to La la for facilitating the trade on receipt of a disc from another member, plus a 49 cent shipping charge.

La la said it will set aside 20 percent of its trading revenue for recording artists.

Other Web sites, such as Peerflix and BarterBee, are also enabling consumers to swap used merchandise.

Peerflix allows members to legally trade DVDs, while BarterBee lets people swap between multiple media, such as DVDs, music and games.


http://news.yahoo.com/s/nm/20060307/wr_nm/media_lala_dc