Ethan Smith from the Wall Street Journal filed an article titled “Listen to music free, buy pay to carry” which is about a new Palo Alto, California-based music distribution portal called Lala Media Inc. The way the service works is that visitors to Lala.com can listen to streamed music (through a normal web browser) from Warner Music’s digital catalogue for free however if they so desire to download and cart the music away they must purchase an entire album. Smith writes:

“It’s like a subscription music service, but without the monthly subscription fee. Lala is betting that in return for getting all that free access to music at home, listeners will pay to buy the songs they want to take with them on iPods and other music players. Lala, whose owners include Bain Capital…is underwriting thr free offering by paying major labels $6 to $8 a user each month, about the same wholesale rate paid by online music subscription services like RealNetworks Inc.’s Rhapsody.”

To be fair – it is a clever idea. I particularly like the site as a music “discovery site” and the way the platform is device agnostic (i.e. mobile phone, iPod, etc). Though that is where my love affair with the site comes to an abrupt halt. What bothers me is that the music is streaming, quality is poor, you must purchase the complete album, and you’re still beholden to some form of DRM.For the record, I’m coming at this proposition slightly biased in that we have been working with Beijing-based Feiliu Media for several months now as they prepare to launch their content platform in September at Tsinghua University in Beijing, PRC.Feiliu’s business model is quite unique in that it not only provides a blanket content license on its content catalog but also tracks content usage – thus allowing users unlimited freedom to share music, video, etc while fairly compensating content providers.We believe the hidden gem in this platform is not so much in the “professional” or “industry” generated content, but rather in user generated content – to whit, Feiliu will be the first platform in China to compensate students, bands, whoever, with cold hard cash for their original work. Quite frankly, this is going to turn the business of collecting user generated content on its head – how can China’s incumbent video blogs, file sharing, and content aggregators compete with a site that pays users for their content? They can’t because they neither track usage nor earn an upfront fee from end-users – all existing sites are ad revenue models which are highly dependent on a high volume of free content.Feiliu’s CEO, Eric Priest, elaborates:

“On the music side, we deal only in full-track downloads, which no one has ever been able to make any money from in China, so most don’t seriously pursue that business. We don’t do ringtones at all, and we don’t add another intermediary to the existing online structure of SPs, etc. We’re a complete platform that deals exclusively with internet service providers (of which there are three in China: CERNET, China Netcom, and China Telecom). Our licensed content is served up via our platform and user interface with loads of rich value-added features like recommendation engines and social networking tools to help people discover new media.We serve up not only music but video and documents as well, including educational materials (English lessons, Harvard lectures, TOEFL classes, etc.). We provide this complete platform for a small fee bundled into every user’s monthly ISP access bill, so we are paid by the ISP, not the user. In return, we license the whole network to freely download and share the content in our system. In order to fairly divide our content revenue pool among copyright owners, we count not just downloads but also plays and copies of each media file, accumulating the most detailed and extensive data on user media consumption in the world. End users can upload user-generated content into our system, promote it among their peers through our platform, and get paid a portion of total revenues for each time the media is watched or listened to. Imagine how important that feature will be on college campuses among bands and student filmmakers.”

In short, Feiliu provide ISPs with the technology and licensed content to serve up all the best content in exactly the way users want it–high quality, reliable, fast, no technological restrictions, in an attractive online environment that helps you smartly navigate content and discover new things you like. What if users prefer to download their content from illegal sites and use a player different from ours? No problem. They are still paying the bundled content fee to the network, which Feiliu still collects and distributes to copyright owners, and Feiliu can still log those users’ content usage because their counting technology is entirely player agnostic, and they need not get the file from Feiliu. Once they have it, Feiliu ID it, count it, and pay the copyright owner.We’re confident there’s no one in this space doing anything close to this business model.