If you've been following the music-tech news lately, you've probably heard about the rather sudden and unexpected acquisition of digital music service Lala by Apple, Inc. Speculation has run rampant about why the country's largest music retailer — which sells individual music downloads via its iTunes store — would purchase a company that's made a name for itself via "cloud-based" access.
Lala has had a few different business models since it was launched by Silicon Valley entrepreneur Bill Nguyen in 2006. Originally it was a CD trading site, where members would rip and trade their discs with other members. From there, the company morphed into a MP3 hosting service that offers on-demand streaming. Currently, users are able to listen to a broad catalog of fully-licensed albums one time for free, after which they can purchase individual downloads or, for ten cents, buy the right to stream a tune as many times as they want. Customers are also able to upload their own MP3 collection and access it remotely from any computer.
Lala recently made headlines when it was revealed that it was be one of the companies chosen by Google to power its new music-search feature, OneBox. We previously wrote about that service, but the basic gist is this: you type in the name of a band or song in the Google search bar, and a up pops a mini-music player — powered by Lala or iMeem (the latter owned by MySpace) — that lets you listen to a song one time for free, and also provides links where you can pay for further access.
Rumors about Apple's acquisition plans started surfacing last week, and by all accounts, the deal has already gone down. No one is sure how much Apple paid for Lala — some reports put the price tag at slightly over 1 million dollars, others claim as much as $80 million was exchanged. Regardless of the sum, the purchase has given music industry pundits plenty to ponder.
Some observers think that Apple is finally getting into the on-demand streaming and/or subscription music game. This makes sense to a degree, although there has yet to be a subscription service that has demonstrated a capacity for long-term growth. Perhaps Apple, mindful of the supposedly imminent US launch of overseas sensation Spotify, wants to use its brand to influence this still-developing marketplace. A reasonable theory, especially with new services like MOG (and it's $5-a-month all-you-can-stream subscription fee) popping up. But it's important to keep in mind that Apple has spent many years and lots of dough developing its iTunes platform which, for music, operates on a dollar(s)-per-download basis. By jumping on the streaming bandwagon, might Apple negatively impact its flagship service?
Another possibility is that Apple is planning on getting into "cloud music" by providing — via Lala's architecture — access to customers' previously-purchased MP3s from any computer. This way, Apple is able to participate in the streaming on-demand revolution without necessarily upsetting the iTunes applecart. Picture it like their "MobileMe" service, but for music.
Whether Apple gets involved in streaming subscriptions or acts as a digital "music locker" (something that's been attempted before by services like MP3.com, which ran into legal troubles), it possesses considerable marketplace power. And with the iPhone still the handset du jour, Apple will have a readymade user-base for whatever model it chooses to exploit. Whereas other iPhone music apps (think Pandora, Rhapsody and Slacker) don't let you check emails or surf the web while you're using them, a Apple/Lala app would likely run in the background, giving it an advantage over other apps on offer.
Of course, it's possible that Apple may not even have plans to develop the streaming on-demand or cloud music, and are simply recruiting talent. Lala's Nguyen has an excellent reputation in the music technology space, as do the Lala engineers. This could be a way for Apple to play a "wait-and-see" game while retaining the possibility of getting directly involved at the moment of its choosing.
One thing's for sure: this topic and more were in full effect at Monday's SanFran MusicTech Summit — an A-list gathering of music/technology/industry minds organized by FMC co-founder and Technologies Director, Brian Zisk. The event also featured our interim Executive Director Jean Cook — we can't wait to hear all the details. In the meantime, we've enjoyed reports about the full house at SFMT's regular home, San Francisco's Hotel Kabuki. Congrats to Brian for another great show!