Apple confirmed on 4 December 2009 that it was purchasing Lala, developer of an online streaming music service that lets consumers sign-in and stream music on-demand with the ability to pay $.10/song to build online libraries of albums and playlists of songs. (Songs are also available to download for $.79 each.)
This has all the signs of Apple hedging on the long-term strength of the a la carte download model, given the recent surge in popularity for cloud-based music experiences such as Pandora, Spotify, or even Napster or Rhapsody. Not coincidentally, each of those services received significant bumps in attention, if not users when they delivered or announced plans to build iPhone applications. I think that Lala’s recently submitted iPhone application might have had something to do with the purchase.
While the terms of the deal were not disclosed, my guess is Apple got Lala on the cheap. Lala’s evolution from used-CD-swapping hub (users would mail CDs to each other via trades arranged through Lala’s site) to freemium-based streaming service required the raising of more than $20 million. A fire-sale price would seem to be another example of how limited the opportunities are for paid online music services.
To me, this deal underscores one of the few constants in life: Apple’s historic preference for a device-based value-proposition for consumers. A content service that underscores the value of Apple’s hardware – without breaking the bank – is what Apple’s always had in iTunes and what it will always want to maintain. If significant numbers of consumers shift to cloud-based services, Apple’s got an app for that, it appears.