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How Apple Killed an iTunes Competitor
An anonymous reader writes "Ed Bott recounts the story of Lala.com, an innovative online music service that reached the top of Google search rankings for consumers seeking music. Their prices were frequently better than the prices on iTunes, and they partnered with Google for the search giant's Music Beta. Lala's founder, Bill Nguyen, decided the time was ripe to sell, entertaining offers from both Google and Nokia. Unfortunately, Nokia's offer was poor, and Google tried to lowball Nguyen. Apple, however, was not so foolish. Correctly identifying a threat to its growing music empire, Steve Jobs offered $80 million for the company, and Nguyen accepted. 'The ultimate irony in this story is that quite a few notable members of the Lala-to-Apple team followed Bill through the door and onward to his next venture. They left millions in options at a the $196.48 exercise price they had from the 2009 sale/retention bonuses. Some of those same engineers returned to Apple in the highly covered [Color Labs acquisition] rumor that 20+ engineers went to Apple for $7M. Apple obtained the same employees for pennies on the dollar. This time with even more experience and startup life under their belt. Paying twice was genius.'"
Apple didn't kill a competitor, a competitor simply sold out, taking $80M and abandoning their creation to others. They apparently made no provisions in the contract with Apple to continue the service and protect existing Lala customers. They could have required that these existing customers continue to be provided the Lala service for a reasonable timeframe but apparently they did not. Apple was free to shut it down in what looks like 5 months.
It seems biased to blame it all on Apple.
Don't you forget that Apple played a huge role in making non-DRM protected music from majors available through online stores in the first place?
First majors started to make unprotected music available through competitors so Apple coudn't control the prices and then they made a bold move and made DRM go away from iTunes for the price of some songs being slightly more expensive than the others.
Are you sure you read the article? LaLa approached Apple and asked to be purchased.
wasn't amazon selling non-drm music for years before apple?
About a year.
It was the music companies last ditch attempt to break free from Apple.
It failed so finally music companies allowed Apple to sell DRM free music (which was never under Apple's control, it was up to the labels which is why Amazon got to do so a year earlier).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The company I own is worth approximately that much, and if ever anyone offered me 80 million for it, the only part of me that would remain would be the cloud of dust dissipating where I had my last presence within its walls.
I didn't start my business because I'm "passionate" about what I do or because I "love" my work. I started it to make money, and for no other reason.
One of the biggest mistakes so-called entrepreneurs make is getting emotionally attached to their work - and I see it happen all the time in my VC club. I've been an angel for a number of startups, but we almost always turn down the ones where the pitch is not much more than how "passionate" the people are about their companies.
It's disappointing how the Microsoft-pioneered "buy up your competitors before they can afford to buy you" technique has become standard practice for Apple.
Oh, child, read some history. That had been going on for at least 100 years before Microsoft existed.
I don't respond to AC's.
From the article: "He [founder Bill Nguyen] called in a few favors and got a meeting with the leadership at Apple. He explained that he had offers from the largest mobile OS competitors and that they wanted to acquire his music startup."
That is not Apple hunting down and killing a competitor. That is a company shopping itself around and playing potential buyers off of each other to maximize the sale price.
My point is that the loss of the Lala service is not entirely Apple's fault. Lala's management deserves to share in that responsibility. They chose a buyer unlikely to continue the service. They apparently did not require a commitment from Apple to continue the service for current customers for a reasonable timeframe.