Apple Buys Lala, Expands into Online Digital Streaming

December 8, 2009  |  5:26pm

Apple announced yesterday that it has bought cloud-based music service Lala for an undisclosed amount. It has not yet stated what it plans to do with the company but it is clear that with this purchase Apple is looking to expand into the streaming model of music distribution.

Lala Media Inc. is a nearly-four-year-old startup based in Palo Alto, Calif. that began as a CD-sharing service and, last year, switched into a cloud-based, streaming model of music sales, offering customers unlimited streaming of songs for 10 cents each. Or users have the option to download a song for 79-89 cents a piece. Unusually, it also allows a one-time free stream of an entire song, before it allows standard-length repeat streams of 30-second snippets.

Despite the unusual and exciting offerings, Lala has been struggling to grow for some time now and large investor Warner Music recently downgraded its investment in the company from $20 million to $11 million. In an effort to expand its reach, Lala teamed up both with Google’s OneBox and Facebook’s gift services only one month ago. Nonetheless, in an apparent act of self-preservation, Lala reached out to Eddy Cue, Apple’s vice president in charge of iTunes, to negotiate a merger deal.

Although, as the New York Times reports, music-industry insiders are doubtful about what Apple is really getting in terms of the record labels. Experts say that most of Lala’s contracts with music suppliers are not transferrable in the event of corporate buyouts.

Apple benefits from the purchase of Lala by acquiring a cloud-based, streaming service, which it does not have. It also wanted to ink this deal in order to have access to Lala’s engineers, including co-founder Bill Nguyen. Lala’s engineers have designed the service to scan the hard drives of users and create an online music library that matches the user’s collection, making it free and very simple to access music in the cloud.

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