By Tom Foremski for SiliconValleyWatcher

LaLa.com launched today--an interesting business that seeks to monetize your CD library. Think of it as monetizing your long tail collection of CDs you rarely play anymore...

For a buck each you can exchange each one for a CD you'd love to hear.

The people behind LaLa are led by Seven co-founder and chairman Bill Nguyen. I popped in to see Mr Nguyen and John Kuch, in business development, a couple of weeks ago to get the prebrief.

LaLa is in downtown Palo Alto in an interesting building and in a spacious office setting that has tons of natural light and high ceilings. When I walked in, Mr Nguyen was escorting out family members who had dropped by to surprise him on his birthday.

We walked into a cooler, darker conference room and sat down on foldable wenge-colored Rex chairs, and switched on the LCD projector. Up comes a user interface that is friendly and intuitive.

"We wanted to be able to give people access to a much larger library of music than ITunes or anybody else. And we have some great search algorithms that can recommend music that you didn't know you might like," said Mr Nguyen.

Basically, the service works this way: you list your CD collection and you mark each one with a "I want" or "I have" and others can browse your CD collection and request your CD(s). You get an email saying that a member wants your CD and you pop it into a pre-paid envelope, as in Netflix, and off it goes.

Similarly, you receive CDs you've requested from others. Each transaction costs just $1. And the artists get a royalty.

You get rid of a CD you weren't listening to, and you get a CD you want, and the artist gets paid about the same as if they had sold a new CD. It is win-win-win.

Clearly, the temptation is to rip the CDs and then move them on. But, should such abuse of the system take place, the artists are getting paid each time. The record companies are missing out on their cut, but hey, they already got their cut...

Check it out and let me know what you think. We have betas available for SVW readers! But sign up quickly because there are a limited number available...

http://www.lala.com/invite/siliconvalleywatcher.com

Here is the official announcement:

‘LA LA’ RETURNS VARIETY TO MUSIC AND CREATES A MUSICIANS’ FUND

The most extensive music catalog available for trading and purchase goes live

Tuesday, March 7, 2006 -- PALO ALTO – According to the Recording Industry Association of America (RIAA) nearly 30,000 album titles are released each year. With nearly 3 million available titles, the largest reseller, Wall-Mart, stocks about 5,000 titles or less than 1% of available music. With choice quickly disappearing, ‘la la’ opens the largest, most diverse music store on earth with 1.8 million album titles all available for $1 each – same price as a song download except the extra penny buys the rest of the album.

‘lala.com’ is an online co-op where members trade-in CDs they have for CDs they want from other members. CDs are sent through the mail in pre-paid envelopes. If an album is not immediately available for trade, members can buy the CD new or as a digital download at retail prices.

“Trading CDs is an affordable way to experiment and try new music,” says Bill Nguyen, co-founder of ‘la la’, “but when you find that album you can’t wait to enjoy, we offer it as a new CD or as a download and often with additional bonus material at retail price.’

First Sale Doctrine and Supporting Musicians

Trading CDs has always been legal under the first sale doctrine codified in the U.S. Copyright Act. The doctrine allows the owner of a lawfully made CD to dispose of the possession of that copy without permission or payment of additional royalties to the copyright holder. As a result, artists were not compensated from the sale of used CDs. Until now… While there is no obligation to do so, ‘la la’ is taking a bold and independent direction in supporting musicians. ‘la la’ is setting aside 20% of trading revenues to honor musicians. Working with artists, labels, and industry groups, ‘la la’ will soon announce a creative way for musicians to financially benefit from the sale of used CDs.

How Search Brought Back the Record Store

Need help finding music? ‘la la’ is introducing the first community-based search engine to help discover music the old fashioned way – through conversation.

As depicted in Nick Hornby’s book, High Fidelity, the local, independent music store was once the social hub where music fans gathered to hear, discuss and buy music. The social aspect which once drove music discovery is disappearing. Today, songs are sold online one at a time or two aisles down from deodorant and laundry detergent.

‘la la’ brings back to music the most important contribution of the local record store: a venue for an ongoing conversation about music-the new social hub for music fans has been born. The more members trade, buy new, share what they’re enjoying and listening to on iPods, iTunes or Winamp, the better ‘la la’ becomes at recommendations. ‘lala.com’ uniquely introduces members to new artists but, just as importantly, ‘la la’ has developed advanced community tools to enable old friends to stay in touch, because the desire to influence a friend’s taste in music didn’t end in college.

It Started with a Song

Conceived by Bill Nguyen and John Cogan while listening to Fountains of Wayne, ‘la la’ is their personal response to how terrible the music buying experience had become.

Billy Alvarado and Anselm-Baird Smith joined with the conviction that music selection should be nearly infinite and conversation should drive discovery not search robots. To back their vision, Bain Capital and Ignition Partners generously funded ‘la la’ with $9M.

‘la la’ the name comes from some of the first words said by Bill’s son.

About ‘la la’

‘la la’ is the first online music co-op where music fans can trade CDs they own for CDs they want. ‘la la’ also offers new full length albums and digital downloads, no singles. With immense admiration and gratitude to musicians, ‘la la’ is the first to introduce payments to performing artists based on the resale of used records.

‘la la’ is based in beautiful Palo Alto, California.