iPod-compatible music site to offer free Web play

Lala.com, a Silicon Valley-based digital music start-up, said Monday it is launching an iPod-compatible online music service that offers free online song play in a bid to get customers to buy music downloads.

The start-up is launching the service with artists from the fourth-largest music company, Warner Music Group, which will sell songs and albums without copy protection software known as digital rights management.

To prevent illegal distribution, downloads will be possible only to an iPod.

Lala is also in talks with other major record companies to expand the service with more music, the company said.

Lala is free and does not carry advertising. The company hopes to make up for licensing costs of playing the music online with sales of songs.

"We believe over the next two years we might lose $40 million," founder Bill Nguyen said. Licensing fees could be $160 million over that time.

"We expect up to 70 percent of people will be freeloaders just listening to the music but around 30 percent will be buying music," Nguyen said.

Lala is backed by Bain Capital and Ignition, which so far have invested $14 million over two rounds. The company is still raising money.