But that doesn’t mean users have just now started trading CDs on Lala. The site has been in beta testing for the past few months, and reportedly attracted just fewer than 100,000 users willing to part with their own CDs in hopes of finding bargains in other users’ collections.

Lala’s modus operandi is simple. Users list the CDs they don’t want on one list, and the CDs they do want on another. When a match occurs, the CD’s owner is sent the name and address of the person wanting the CD. The owner then ships the CD in a postage-paid envelope supplied by Lala, while the receiver is charged a dollar plus 49 cents for postage when he or she confirms the disc’s arrival. Like other trading networks, the more one ships, the more one receives. In other words, if you want to receive 10 CDs, you have to ship 10 CDs.

Aside from its official launch, Lala also made news recently when it announced the formation of the Z Foundation, described as a “non-profit that seeks to unite working musicians to address the economic challenges they face.”

Along with announcing the formation of the Z Foundation, Lala also said it would initially contribute between $10,000 to $50,000 monthly, depending on trading action. Lala plans to distribute 20 percent of the revenue from each trade to performing artists.

But not everyone is in tune with the happenings in Lala land: Specifically, the record labels, who see the trading site as one massive copyright infringement opportunity. In the eyes of the labels, people trading on Lala will acquire a CD, rip the tracks, and then put it back on the trading block while they wait for the next CD to arrive in the mail. The labels have also expressed concerns that Lala users will merely burn CDs and then send the copies to other users, even though Lala discourages this practice and asks that its users report any burned copy they might receive as part of a trade.

Of course, trading used CDs, as well as selling used CDs, is perfectly legal as long as the CDs are not presented as new. The concept is often referred to as first sale, and it means just what it says. When copyrighted material is sold as new, such as a CD, DVD or a book, royalties are collected and dispersed to the intellectual property holders. However, if the item is resold as “used,” no such royalties apply and any profit made from the sale goes straight into the seller’s pocket.

Needless to say, the recording industry isn’t a fan of first sale, and about 40 years ago tried to stop stores from dealing in used music. That is, until the courts ruled in favor of the sellers.

And the industry doesn’t have anything nice to say about Lala. As detailed last month by the Los Angeles Times, many music execs think of Lala in terms of “quasi-legalized piracy.”

“This is a nudge-nudge, wink-wink way to get around the law,” EMI’s senior VP of digital development Ted Cohen told the Times. “It makes it easier for people to copy CDs and steal music. Why would the music industry do anything to encourage a company like that?”

Actually, label encouragement is something Lala founder Bill Nguyen was counting on when he fired up the CD trader in the first place.

Nguyen has envisioned several different revenue streams resulting from Lala CD trading, including a yet-to-launch online music store, according to the Times. The logic is, as demand for certain CDs outstrips the number of users willing to trade in those discs, Lala customers will bypass the trading angle and purchase new CDs from Lala’s store.

Then there’s all the user data Lala is acquiring via the trading. Data which denotes user tastes and buying habits.

Or, as one Lala board member told the Times: “If we know what CDs you keep and don’t keep, we can spur purchases of new albums. The more we know about you, the more effectively we can encourage you to buy.”

Even though the labels are not enchanted with the goings-on at Lala, it probably would have been surprising if the recording industry had given the CD trading site its blessing in the first place. After all, the labels are in the business to make money. CD trading, as well as the buying and selling of used CDs, cuts the labels right out of the loop. So you really can’t blame the labels for not being all that crazy about Lala.

But it’s a pretty safe bet that the labels haven’t been too crazy about a lot of things that have appeared over the past few years. Things like the MP3 files and CD burners. But then, like most people, the labels may very well have to do what everyone else must do from time to time when faced with unpleasant circumstances beyond their control.

In other words, when it comes to CD trading on the Net, the labels may just have to learn to live with it.