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Apple Buys Lala Music Streaming, But Why?

Apple has snapped up music streaming biz Lala in what many initially thought to be a move to step beyond the strict download market of iTunes. On closer inspection it seems that Lala was a somewhat less-than-ideal target and Apple may just be gunning for ready-made engineering talent. "On balance, the purchase appears to give Apple the chance to bring in engineers that will be useful now, and could be even more so if it chooses to enter streaming or subscription services. But, for the moment, there's nothing about the purchase that seems to provide the company with any key technologies it was missing in terms of diving into markets. Until another company demonstrates that there's money to be made (or iPods to be sold) through streaming, there's no reason to think that a move of this sort is imminent."

31 of 131 comments (clear)

  1. Google by bill_mcgonigle · · Score: 4, Informative

    Lala.com is the most frequent entry in the Google Audio search for searches I've done. If Apple can control Lala, they can largely control or hamper Google's competition against iTunes.

    Does there need to be a more complex explanation than simple competitive pressures?

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    1. Re:Google by IANAAC · · Score: 2, Insightful
      Is Google competition for iTunes?

      I've honestly not ever heard that before.

    2. Re:Google by hansamurai · · Score: 5, Informative

      “parent directory” mp3 OR wma OR ogg OR wav Band/Singer -html -htm -download -links

    3. Re:Google by 99BottlesOfBeerInMyF · · Score: 3, Informative

      It looks more like "market shaping" to me - streaming is a contradictory market strategy to the "pay per download" model that Itunes uses.

      Lala's business model incorporates pay per download as part of it, rather than contradicting it as you claim. You search Google and a link pops up. First listen is free for music discovery. You can pay a small amount each time to stream it successive times or you can buy it and download it as well as be able to stream that song whenever you want. It neatly incorporates the two models. A cynic might claim it eliminates the revenue from people repurchasing songs they downloaded then failed to backup and lost somehow, but I don't think that is a significant source of revenue for Apple. Rather, the goodwill from letting people re-download songs will make for happier customers, enhance the Apple brand, and lead to more hardware sales, which is where Apple makes the real money.

    4. Re:Google by Z00L00K · · Score: 2, Insightful

      No need to own a stake - sometimes a service is high on the search results anyway.

      But sometimes it's better to buy a relatively small service that has the right stuff and adapt it to your model. So we will probably see a promoted music streaming service from Apple - streaming to the iPhone and other devices.

      And the telcos will make a large amount of money from a streaming service to the iPhones. And especially for people who forgets about it and streams music while roaming. Can cause a phone bill the size of a new car.

      --
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  2. "Immanent"? by abigor · · Score: 4, Funny

    Ah yes, the purchase of Lala will not, therefore, make Apple present throughout the universe.

  3. One Word by Alcoholic+Synonymous · · Score: 4, Insightful

    Google Search for any song online via Google and Lala brought a stream right to you. First listen is free, after that you have to pay. Why would Apple buy them? Considering most sane people use Google and Lala doesn't require something like iTunes, Lala was in a better position to bring music people want directly to them. This is just eliminating the competition before they got too big. Can I get an Antitrust Amen?

    1. Re:One Word by furball · · Score: 2, Funny

      Do insane people avoid Google?

    2. Re:One Word by Enderandrew · · Score: 5, Insightful

      What if they want to just use Lala as a gateway for directing people to buy music off iTunes?

      People search for music. They get the Lala sample, and then iTunes swoops in for the sale.

      Seems very logical to me.

      --
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    3. Re:One Word by 99BottlesOfBeerInMyF · · Score: 3, Interesting

      Google Search for any song online via Google and Lala brought a stream right to you. First listen is free, after that you have to pay. Why would Apple buy them? Considering most sane people use Google and Lala doesn't require something like iTunes, Lala was in a better position to bring music people want directly to them.

      That is probably the biggest reason.

      This is just eliminating the competition before they got too big. Can I get an Antitrust Amen?

      Umm, you don't know much about Lala do you? They admitted that they did not foresee any time in the near future where they would be profitable and as a long term investment were actively seeking someone to buy them to keep the service going. I doubt this will raise antitrust flags since Lala did not have significant market share and what they did have was primarily streaming.

      As for the other reasons Apple bought them, besides the Google deal... They have significant engineering talent, they have a solid subscription streaming solution which is missing from Apple's lineup and that solution scales into individual downloads which is Apple's main offering, and they have their service built as a Web service, where Apple has recently started expanding iTunes. In fact, one analyst (UBS ) has already been speculating this signals Apple being serious about making iTunes a Web service that will work with any device and a possible service to run out of Apple's giant new server farm. If so, that would be breaking the exclusive ties between the iTunes store and Apple's hardware offerings which would in fact get rid of Apple's biggest potential antitrust problem.

    4. Re:One Word by Anonymous Coward · · Score: 2, Funny

      Do insane people avoid Google?

      No, they think they're 'googling' while in fact they're using Bing

    5. Re:One Word by uniquename72 · · Score: 2, Funny

      Lala was in a better position to bring music people want directly to them.

      This is precisely why Apple should purchase Pirate Bay.

  4. Confessions of a monopolist by megamerican · · Score: 2, Insightful

    "Competition is sin." -John D. Rockefeller

    --
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  5. Article summary appears to have it backwards by znu · · Score: 5, Interesting

    The initial NYT article about the acquisition said it was only talent related, while a more recent Reuters article has the following quote:

    A source familiar with the matter said the iPod, iPhone and Mac maker is seeking new ways to expand iTunes to move it beyond being a predominantly download service for songs. The source asked not to be named.

    "Apple recognizes that the model is going to evolve into a streaming one and this could probably propel iTunes to the next level," said the person.

    The truth is, nobody really knows what Apple is up to. Which is, of course, just how Apple likes it. I wouldn't put it past them to have deliberately leaked a couple of conflicting stories just to keep everyone guessing.

    --
    This space unintentionally left unblank.
  6. Imma-what? by Yamata+no+Orochi · · Score: 5, Funny

    Immanent...I don't think that word means what you think it means.

  7. Re:Logic Pro anyone? One less Windows product by jo_ham · · Score: 3, Insightful

    iTunes runs on Windows. How would making it iTunes-only restrict it to the Mac platform?

    How did this get modded insightful?

  8. Hopeful for some personal gain by teh_commodore · · Score: 5, Interesting
    As a Mac owner and iPod/iTunes user AND a [the only?] paying LaLa customer, I'd be absolutely thrilled if this led to tighter integration between the two products.

    Right now, I have iTunes that I use to update my iPod and LaLa which I primarily use to listen to music when I'm on ANY web connected computer. I use LaLa over iTunes at home because I have streams for some songs that I have a paid license to listen to on LaLa that I didn't pay the extra 79 cents to download, so they aren't available in my iTunes.

    With LaLa, if I have an internet connection, I can listen to my songs and streams from anywhere, which means I don't need copies of all of my MP3s (or whatever) on my laptop, my work machine, my home machine, etc. It's amazing, and stream licenses are only 10 cents per song.

    LaLa also provides a music mover app, which watches my iTunes directory and automatically unlocks the streams in LaLa of the tracks of whatever CD I just imported on iTunes.

    Suffice it to say, I love it, and if they integrated the two products, I'd love it even more.

    --
    --"insert clever quote here"
  9. obviously, you haven't been paying attention... by Thud457 · · Score: 3, Insightful

    Is Google competition for iTunes?

    I've honestly not ever heard that before.

    Google is competition for everything, it's just a matter of how soon.

    It's a dessert topping and a floor polish.

    --

    the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff

    1. Re:obviously, you haven't been paying attention... by silent_artichoke · · Score: 3, Funny

      mmm.. chocolate floor polish *drool*

  10. Re:iPhone streaming? by lwsimon · · Score: 4, Funny

    Your post makes AT&T's network cry.

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  11. iTunes upload/sync by mapdock · · Score: 3, Interesting

    Lala offers a feature that lets you upload your iTunes library and keep it synced; I always described it as "like having access to your iTunes library from anywhere online," so I can see Apple being interested from that angle.

  12. Buy the patents, compete with Spotify by fluor2 · · Score: 2, Insightful

    1. Buy the patents
    2. Compete with Spotify

  13. Re:Logic Pro anyone? One less Windows product by SydShamino · · Score: 2, Funny

    Of course not. They're defined by their hardware choices. . . at least if they're seen with a Zune.

    I kid.

    --
    It doesn't hurt to be nice.
  14. But what about by Anonymous Coward · · Score: 2, Funny

    Tinky Winky, Dipsy and Po?

  15. Re:Logic Pro anyone? One less Windows product by jo_ham · · Score: 4, Funny

    I saw a Zune in a store once. When I got home, 5 people had unfriended me on FaceTube.

  16. Me's failure explains LaLa's acquisition by akouris · · Score: 3, Interesting

    I think that as arrogant as one might say that Apple is, they have realized that the world of internet/asp services is much different than something that you totally control, in a closed environment of an OS. They learned that the hard way through the numerous shortcomings of Me, a service which was very ambitious, but today still remains very unrealiable and has numerous shortcomings in all categories (mail, calendar, contacts, photos, idisk) when you compare it with other free alternatives. When Me was initially announced, for a brief moment Apple had the chance to turn the market upside down, and be a leader in the ASP/cloud services arena. Today they are not even considered a strong player - Me remains a supplementary service for only a small part of the iPhone base of users. Consider what could have happened with Me if Apple had purchased a number of successful services (Yousendit, Dropbox, Plaxo, etc.) and combined them under one umbrella - their offering would be unmatched, they would have a brilliant team of developers, and today they would probably be leaders in the market. I believe that this is the basic thinking behind Lala's acquisition: they are buying time, which is the next best thing after money: they are buying time they have lost, against Lala.com, Last.fm. They are buying time that they would loose if today they began to develop their own streaming service. They are buying time that it would take them to learn the mistakes others did. With the cash reserves that Apple has right now, if it follows a clever acquisition strategy it can pretty soon gain a significant presence in internet, one that in time would rival that of Yahoo, Microsoft and perhaps even Google. If the rumors surrounding the recent sale of AdMob are true, it seems that Apple is implementing such a plan.

  17. Re:Logic Pro anyone? One less Windows product by VRisaMetaphor · · Score: 4, Funny

    Has the Windows version of iTunes aver lacked feature parity with the Windows version?

    I would have to say no.

  18. Re:Streaming Music is a Logical Extension of iTune by Duradin · · Score: 2, Informative

    Wait, Apple put DRM back on music? When did that happen?

  19. Re:Streaming Music is a Logical Extension of iTune by Duradin · · Score: 2, Informative

    Advanced Audio Coding. It's part of MPEG4. Apple *HAD* used DRM, but it wasn't part of the AAC spec itself. Now (in the US) the music is DRM free and has been for some time.

  20. Re:Logic Pro anyone? One less Windows product by UnknowingFool · · Score: 2, Insightful

    First of all $4 billion for the division not just for iTunes. Second, that's revenue not profit. In many businesses, if the wholesale cost is 70% of revenue, the product is not going to make much profit. 30% left for overhead means the profit may be 5-10% if the business runs lean. So yearly that would put iTunes at $100 million profit maybe. That sounds like a lot but it isn't considering the amount of effort to acquire the profit.

    So, from where I sit, Apple definitely *does* have interest/incentive to try to dominate music distribution - both to sell more of their 'own' products, and to increase the "Apple Tax" they collect on each track.

    Except Apple has done everything opposite to what you would expect if they were trying to gain more share. Converting their entire catalog to non-DRM'ed only helps their competitors. Apple sells music because their customers want it and no one else was going to help their customers.

    Here's where the acquisition of Lala to remove a competitor doesn't make sense financially. How many much more in sales would Apple get in eliminating Lala? A few million maybe. That translates to tens of thousands in profit. And how much did Apple pay for Lala? If they spent $10 million, it would take decades to pay back.

    If you look all the major acquisitions of Apple since Steve took control, every one was for a particular purpose or product, not to undercut competition as MS would do:

    • NeXT : became the basis of OS X
    • KeyGrip (from Macromedia): became Final Cut Pro
    • Emagic: developed into Logic Pro, Garage Band
    • SoundJAM (from Casady & Greene): became iTunes
    • P.A. Semi: chip design for next gen iPod/iPhones
    --
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  21. Re:Logic Pro anyone? One less Windows product by Kalriath · · Score: 2, Informative

    And the Windows version has COM interops (so, VBScript support).

    Does either version have a graphic equaliser?

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