Digital Trends

Lala.com has thrown open the doors on its beta CD-swapping service: for $1 a trade, lala.com will hook you up with someone willing to swap for the music you want.

Newborn CD-swapping service lala.com has opened its doors to the public, inviting Internet users to sign up (for free) and begin exchanging audio CDs amongst themselves for $1 per trade (plus $0.49 shipping). Unlike peer-to-peer file sharing networks, lala.com isn't dealing with digital song files—and, actually, isn't materially participating in any transactions at all. Instead, users post what CDs they have that they're willing to trade, as well as a list of CDs they'd like to receive. The lala.com service matches up users based on what they have and what they want, enabling them to set up an exchange for $1.49: users then send the CDs to each other, and lala.com collects a dollar for running the site, administrative costs, and—in an original move—trying to pay the musicians whose recordings are being exchanged.

Lala.com has been up and running in a closed beta for several months, and claims to have 100,000 people already using the service, and an additional 200,000 already signed up to participate in the live version. The company also says the catalog of music available on lala.com is already deeper than what customers will find on eBay or Amazon.com, comprising more than 1.8 million album titles.

Record labels and the RIAA have, to date, remained mum about lala.com's business mode. Some industry analysts say it does little but encourage piracy of audio CDs since, they argue, users are making unauthorized digital copies of CDs they receive in the mail then put back up for trade on lala.com. (Although trading or selling physical CDs is permissible under current copyright laws—something the media industry would no doubt like to change—making retaining a digital copy of a music CD after it's been traded away severely strains the boundaries of fair use.) On the other hand, some labels and artists consider services like lala.com to be an opportunity for people to hear their music and try their products—an easy way for listeners to discover new music. Lala.com's business model is not entirely untested: DVD-swapping service Peerflix has been up and running on a similar basis since 2004.

In an unusual move, lala.com is dedicating $0.20 of each dollar it earns in a CD swap to the "Z" Foundation, a non-profit the company has started with the idea of distributing money earned from the CD swaps directly back to performing artists. The idea is similar to an online co-op, where qualified musicians can sign up and receive financial support from the Z Foundation. Working artist are then eligible to receive financial support based on "social accounting technology" feedback from users and artists.