Lala Plans to Open Music-Streaming Dime Store on iPhone

Online music retailer Lala is preparing to launch an iPhone application that its cofounder says paves the way for the end of downloading songs in the MP3 format.

The app allows users to buy the right to stream songs from a digital locker forever for just 10 US cents each. The song quality is lower than what Apple's (Nasdaq: AAPL) iTunes offers, but "intelligent caching" lets the tracks load and play in seconds, with playback possible even outside of cellphone coverage.

An existing iTunes library can be synchronized with one's Lala account, meaning a person doesn't have to repurchase songs to listen to them within the app.

Death to the MP3?

In a demonstration for The Associated Press, songs began playing in about two seconds, compared to the more than two minutes it took to download an iTunes song over the AT&T (NYSE: T) 3G cellphone network. Consumers are allowed one full-length free preview of each song.

"There's no downloading, no links to click on, it's just there," said Lala cofounder Bill Nguyen, who described the concept as the start of "the end of the MP3."

The advantage of having songs in MP3 files is that they can be downloaded and played on a variety of devices and computers. Meanwhile, streaming services pump music directly to a computer or mobile device, but not in a form that the user can store and play any time, even while offline.

Pay Scale

Lala's iPhone app aims to get around that downside of streaming while taking advantage of the device's power as a music player (it has an iPod inside it, after all) and undercutting the prices charged on iTunes, where songs generally cost 69 cents to $1.29.

Once users pay 10 cents to have a song streamed from Lala, they can hear the track essentially any time. The songs that a user listens to most often in the app or designates as favorites are automatically loaded in the phone's memory, which is the step that allows them to be heard any time, even out of cellphone range.

The songs are streamed at as few as 32 kilobits per second, depending on cellphone reception -- which is about the same as some smaller radio stations stream online but far lower quality than the 256 kilobits per second common to iTunes. It can lead to a flatter, fuzzier sound. Nguyen said sound quality could improve as cellphone networks become stronger.

Approval Pending

Lala will also sell higher-quality versions of the same songs as MP3s for 89 cents each. However, that requires hooking the user's phone to an Internet-connected computer.

The app, which itself is free, is set to debut on Apple's iTunes app store next month pending approval. Apple had no immediate comment Tuesday.

Lala, a private company based in Palo Alto, Calif., was launched in 2006 with $35 million in venture capital from Bain Capital, Ignition Partners and Warner Music Group.