TechCrunch reports that lala.com, WOXY's knight in shining armor and the hapless object of Bob Lefsetz's bitterest ire, will offer free, on demand streaming music to its members. TC breaks down the numbers and they don't look to be goldmine-ish at first glance. Basically, it's going to cost about $.01 per song to do this legally, and the labels will sign short term deals to reserve their right to renegotiate for higher rates if Mr. Nguyen is able to pull a rabbit out of his hat.
This on demand service (and WOXY, for that matter) are meant to drive lala's CD trading business. For $1, users arrange with each other to trade discs through the mail. It's important to note that not a penny of this goes to record labels, music publishers, or artists*. Much like the secondary concert ticket market, the secondary disc market is something these folks are just dying to get a piece of. You'd better believe that if the labels can't swallow some pride and make nice with Bill Gates**, they're sure as hell not going to give Bill Nguyen and lala a break with the rates.
Argue all day long about the level of exposure and sales this may or may not drive. Labels couldn't care less about Internet Radio's potential to do the same, and they certainly aren't going to be any more favorable to lala, especially when the sales this service aims to drive sidestep them altogether.
As cool and useful as this service might be for lala's members, it has some seemingly insurmountable hurdles from a business standpoint. I'll be surprised if it lasts.
* If you're also a gamer and you ever wonder why the clerks at EB Games try to push the used disc on you instead of the new one, this is why. It's pure profit.
**I'm talking here about Universal insisting on a cut from every Zune sold. But mostly I used Bill Gates instead of the more obvious Steve Jobs because his name was Bill.