Lala Shuts Down – Thoughts on Closing a Business

June 8, 2010

lala-logoLala, a popular streaming music store and service, shut its virtual doors over the Memorial Day weekend. The closure was announced about a month ago, along with much chatter about the possibility that Apple, Lala’s new owners, had shut the service down in order to incorporate it into some sort of iTunes streaming cloud.

That might be true. Regardless, I bemoan Lala’s closing. I had grown attached to the service, using it almost exclusively to buy and listen to music; urging my friends to do the same. Lala got a lot of things right in terms of how I (and I assume others) consume music. You could listen to a track once for free. Then, if you wanted to purchase the track, you could download it for $0.79 to your computer; or for $0.10, you could add it to your Lala library and stream it from any computer with an internet connection. It offered the first viable non-iTunes, non-stealing-based digital music service.

But this is not an article about how Lala worked or ran their business. This is an article about how Lala closed their business; and more specifically, about what a customer can or perhaps should expect from a business as it’s closing. Admittedly, Lala is a strange case as its closing was due in many ways to its success (which led Apple to buy them, etc.). But a closing business is still a closing business from the stand-point of its customers.

Interestingly, when doing research for this piece, I found quite a bit of information about the financial and legal obligations of closing your business, but none about the customer relations obligations. This makes sense, of course — the financial concerns are going to be thorny and paramount — but I do worry that many business owners, overwhelmed by the legality of closing a business, simply don’t focus on their customers during that time. I spoke with Paul Greenberg, author of CRM at the Speed of Light and writer for CRM Magazine, about what a business can gain from continuing a commitment to its customers through the closure. “While that business may have ended,” he said, “the owner’s work history continues – and he might want to start up something new. That means how he closes the business could have impact on what his former customers tell his future customers publicly – either directly or via their support or outrage on public forums.”

Announcing the End

The first part of any closure, of course, is letting people know. In most cases, the customer is going to be surprised and worried about how the closure will affect their own lives. A good announcement will be clear about the situation — understanding that the customer is losing something and they will want some explanation.

In Lala’s case, I received an email:

Dear Matthew L.,

The Lala service will be shut down on May 31st.

In appreciation of your support over the last five years, you will receive a credit in the amount of your Lala web song purchases for use on Apple’s iTunes Store. If you purchased and downloaded mp3 songs from Lala, those songs will continue to play as part of your local music library.

Remaining wallet balances and unredeemed gift cards will be converted to iTunes Store credit (or can be refunded upon request). Gift cards can be redeemed on Lala until May 31st.

Click here or visit Lala.com/support for more information, or to view Lala’s Terms of Service.

Thank you.

Lala

While they did explain that all the money I spent on Lala’s service would be refunded to me, they gave me no information about why they were closing. It sort of feels cold, like a girlfriend who just up and left one day without any explanation; just a pile of money repaying you for your portion of the dinners you two had together.

Now, I know that there are probably book-length legal documents that constrain the folks at Lala from explaining too much; but that doesn’t change how I, as the customer, feel about it.

The Terms of the Breakup

If the company has any outstanding obligations and/or promises to their customer base, they next need to explain how they will honor those obligations. In other words, they need to explain the terms of the breakup. The more complicated their service relationship to their customers, the more complicated it will be to leave the relationship cleanly.

In some cases, I’m sure the obligations are legally required — maybe I should have actually read those Terms of Service — but in others, they may not be. Take, for instance, gift cards. As a Consumer Reports article from 2007 points out, “If a card issuer goes out of business, its gift-card holders might be out of luck.”

Or, see this cautionary tale from Greenberg: Recently Myer-Emco, a small electronics chain of which he had been a customer, went out of business. “They made a commitment in a letter (snail mail) and online that they would continue to service customers for roughly 60 days after closure and then provide them with alternatives.” During that time, he actually started experiencing problems with one of the pieces of equipment he had bought from them, he called and emailed them, and “was totally ignored.” As he says, “I had been a COMPLETELY loyal customer, paying premiums for years to support them and their business. I couldn’t get a copy of my customer record, much less service. If you go to their site as of about 3 weeks ago, there is a note from them that they will help you get support etc. if you email them. I did and am still waiting response.”

This treatment is enough to ruin the 10 years Greenberg had previously given the company. “The way that they handled it makes me certain that I will NEVER do business with anything that has the owner’s name again and will discourage people from the same should it come up – which in a local area, it might.”

In Lala’s case, they did basically right by me. As described above, everything I bought and downloaded from them I got to keep (obviously); and any money I spent on their streaming service was repaid in iTunes credit. I leave feeling sad, but not screwed.

(However, they didn’t excel at this either. I wrote them asking whether they offered any way to download a list of all the music I had added to my streaming library. Their support wrote back after a day:

Unfortunately we do not have the ability to export collection or playlist listings. Sorry for the inconvenience.

That’s a fine answer, but again: cold.)

The Transition

After announcing the closure and how they will disengage, the business needs to officially close its doors. While this is (usually) a sad occasion, the business owner could take advantage of their customer community and do a proper send-off, whether that’s having a last day for people to gather in your store or a simple letter thanking the customers and explaining what might be happening next. The important thing, as Greenberg explains is to help “transition” customers. “If someone goes out of business,” he says, “you have to presume that unless they remain filthy rich, they are going to get back into business somehow. Using CRM as a strategy to transition customers or prepare them to transition should the need arise, is not only possible, its wise. Especially in an era being defined by a social customer – who can help you move on or hurt you, depending on how your business treated them ‘at the end.'”

For Lala, there was no transition, just an end.

lala-closing

I am going to give Lala the benefit of the doubt and assume they can’t tell me what’s going on. But can they at least tell me that they can’t tell me? In the end, I leave feeling like they didn’t really care about me. I am not their highest concern.

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