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RAIN 12/7: Apple buys cloud-based music streaming service Lala

Posted on: 12/07/2009

Late last week, Apple struck a deal to acquire Lala, a California music company that provides cloud-based streaming music services — that is, allowing users to stream purchased music from the web rather than offering a direct download. The four-year-old start-up initially began as a CD-swapping service and was owner of webcaster WOXY from 2006 until this past February. Lala provides song streams to the recently-announced Google “OneBox” music service, which also involves Pandora, Rhapsody and Imeem (RAIN coverage here).

There’s little else to go on as the terms of the deal with Apple were not disclosed, reports The New York Times (here). Though an Apple spokesman said the company “buys smaller technology companies all the time, and we generally do not comment on our purpose or plans,” the acquisition has prompted many to ponder if Apple will be moving into streaming and cloud-based music services.

“This could probably propel iTunes to the next level,” said an unnamed source familiar with the matter, reports Reuters (here). “I am sure Apple is watching streaming music, the traction of Pandora, of course, and other streaming applications on the iPhone,” said head of SurveyMonkey and former general manager of Yahoo Music David Goldberg. “There’s a legitimate question here: Why should people have to download music?”

RAMSEY: APPLE MOVING INTO STREAMING WOULDDRAMATICALLY BLOW UP” WEB RADIO MARKET

If Apple is indeed moving towards launching a streaming music service, it would have a profound effect on webcasters and broadcasters alike. Industry analyst Mark Ramsey (pictured left) writes that such a move from Apple would “increase the market for what radio stations offer online…in the near term we will see this explosion of listener-paid models alongside an explosion of advertiser-supported ones.”

Broadcasters would be challenged to again “reconsider what their unique proposition is in the digital space,” writes Ramsey (here). He believes the content broadcasters stream will have to change, as might relationships with listeners (“We will have to consider models which invite listeners to pay for such content”).

“The best defense against what Apple is likely to pull off…is personality radio. The very kind of radio consolidators have killed off,” writes industry pundit Jerry Del Colliano (here). He believes broadcasters need to “get back in the entertainment, discovery and music business. In other words, enhancing what a consumer will be able to do with their music libraries alone.”

SLOW DOWN, SAYS ARS TECHNICA, APPLE MAY NOT JUMP INTO STREAMING ANY TIME SOON

Yet there’s still the question of if Apple’s acquisition of Lala even means they’ll be launching a cloud-based music service. For Ars Technica, signs indeed indicate that Apple will inevitably offer streaming services, “but the purchase of Lala isn’t necessarily a sign that ‘inevitably’ means ‘soon.’”

For one thing, the acquisition does not include Lala’s music licensing deals as those are not transferable. They’re only U.S. deals as well — Apple would need to negotiate new deals with each and every country it wanted to operate in. Plus, Lala was struggling to achieve profits and Apple “has generally resisted jumping into markets where hardly anybody has figured out how to make money.”

Ars Technica suggests (here) that Apple is perhaps “simply after an engineering team with extensive storage and distribution skills…There are any number of existing and rumored Apple ventures that this sort of expertise might improve.”



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