Software giant Apple has now reportedly acquired music streaming service Lala for an undisclosed amount, with the purchase focusing on the company’s engineering talent in an attempt to expand its iTunes software.
But some analysts have suggested Lala’s innovative streaming services, built around cloud-computing, may not be kept through the acquisition process.
As reported in the New York Times, sources have suggested Lala first approached Apple about an acquisition after internal discussions took place regarding its lack of profitability.
“One person with knowledge of the deal, but who was not authorised to discuss it, said that the negotiations originated when Lala executives concluded that their prospects for turning a profit in the short-term were dim and initiated discussions with Eddy Cue, Apple’s vice president in charge of iTunes,” the report stated.
The company, which was founded by Silicon Valley entrepreneur Bill Nguyen in 2006, is funded by venture capital firms Brain Capital and Ignition Partners, and has also recently received $US20 million in funding from Warner Music Group.
The site offers a number of different music-related products, including CD trading, playlist creation and a plugin that allows users to integrate their computer’s music with an online account.
But the company’s main product is a playlist creator which allows users to stream songs for an infinite number of times for only 10c per song, if a user is connected to the internet. This cloud-based service differs from Apple’s iTunes software, which requires users to download songs before listening to a full version.
Lala has gained popularity over the last year, with Facebook integrating its services as part of the social network’s online gift shop. It has spent a lot of time obtaining streaming licenses from major music companies, and has obtained a team of software professionals to help design what has been called a cloud-computing version of iTunes.
It is this engineering power which has been targeted by Apple, reports have stated, as the giant is rumoured to be embarking on a cloud-computing project of its own.
But while Lala has gained popularity over the last year, its executives have reportedly been disappointed with the company’s progress so far. Its powerful tool which allows users to match their offline music collection onto a cloud-based server has not seen a large take-up, as users are doubtful of the control a relatively new company would have over their music.
However, it would make sense for Apple to be interested in such a powerful software tool to be integrated with its iTunes software. As a result, some analysts have suggested Apple will ditch Lala’s streaming music services.
“Other music industry insiders are wondering what Apple is buying exactly,” Brad Stone at the New York Times wrote. “Lala’s licenses for streaming music with the major music labels are not transferable to any acquirer, and its service has not been a hit with mainstream consumers.”
Industry blog TechCrunch predicted it was “unlikely that the innovative deals negotiated by Lala will survive through the acquisition”.
“For over a year, Lala users have been purchasing the rights to stream their music an unlimited number of times for 10 cents per song. If the deals with the music labels go up in smoke, Lala may lose the right to stream those songs. In other words, all the money users have been spending on web songs may go down the drain.”
Both companies have refused to release details regarding the acquisition.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
