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Posted on 12/07/2009 8:45:37 AM PST by Star Traveler
December 07, 2009 - Digital and Mobile
By Glenn Peoples, Nashville
With its acquisition of online music start-up Lala, Apple appears to have bet on a digital music strategy that places ownership – no matter how ephemeral - over subscription. And more than competing services, Lala best fits into Apple's desire for well-designed applications that complement other Apple products. The iPod wouldn't be the same without iTunes, and the iPhone should be better with Lala.
Apple's interest in Lala is not surprising. Compared to other services, Lala has an iTunes-like approach to music. Unlike Spotify, Lala does not have advertisements or a subscription model. Unlike MySpace Music, it encourages purchasing over loitering. And like iTunes, Lala facilitates the management of a user's music collection. Even though Lala sells MP3s, it differs from iTunes in one major aspect: Lala is in the clouds. The service is a unique hybrid that acts as an online music locker (by syncing a user's stored music collection to Lala's servers) as well as a store. And unlike most online music stores, Lala sells MP3s, CDs (for many, but not all, titles) and what the company calls "web songs." For 10 cents, a user can add a song to his collection and stream it an unlimited number of times.
The immediate question is: what will happen to the current incarnation of Lala? Apple's resources could make it a more formidable opponent to the handful of streaming services hoping for mainstream appeal. On the other hand, Apple could use Lala as the technological basis for a service of its own. Current Lala users must wonder how they will be affected by the acquisition.
Apple's acquisition of Lala will be successful if it helps the company do any one of three things: fend off new competitors in cloud-based music services; establish a better mobile presence; and sell more high-margin hardware. In Lala, Apple gets a service with a penchant for creating excellence through programming. The technology behind Lala's iPhone app, not yet released but said to be superb, would grant Apple mobile users access to their music collections through any Internet connection. And, in a best-case scenario, the integration of Lala's technology could help Apple sell more hardware. Post-acquisition, Lala may be either an Apple-only mobile application or part of a new Apple service. Either way, Lala would provide a point of differentiation that could help bolster smartphone sales amidst growing competition from Google, Blackberry and others.
Lala also has two key partnerships that give it additional momentum. First, Lala recently entered into a partnership with Google to provide song streams in search results. Second, the company also has a partnership with Facebook to power song purchased from the Facebook Gift Shop. Both could prove to be integral in separating Lala from the rest of the pack.
Apple goes LaLa with music... :-)
and iTunes Music Store info on Apple's site
Apple appears to have bet on a digital music strategy that places ownership – no matter how ephemeral - over subscription.
The ownership factor of music is one thing I appreciate with Apple over some other service. In addition, Apple finally got the music companies to release their stranglehold on music and the ability to use it freely -- by getting them to finally remove the DRM protection.
Apple had not wanted that DRM on there since the beginning but the music companies forced Apple to do it. But, finally (relatively recently) Apple finally convince the music companies to no longer require Apple to put the DRM on the music that is sold at the Apple iTunes Music Store. And now Apple is going further by, once again, emphasizing the "ownership" factor of the music over "subscription usage"... :-)
These guys know what they're talking about...
Wired...
"This unique, inexpensive model enables Lala to do something nobody else can: offer an encyclopedic, licensed, on-demand music service that doesn't include a single advertisement."
TechCrunch...
"Lala May Have Just Built The Next Revolution In Digital Music. The company has the best streaming music product on the Internet today, and a business model that doesn't burn cash... It's the joy of using products like Lala that keeps me excited about startups."
Technologizer...
"Lala's Spectacular New Music Service" - Technologizer Blog named Lala the "Most Magical New Service of 2008 - a wonderful, wonderfully rich music service... What's impressive about Lala isn't just the number of things it does, but how well it does them."
Billboard...
A WEB BROWSER IS MY IPOD
Editorial Opinion article by Lala founder, Bill Nguyen "We live in the best era for music; a democracy with nearly infinite selection freed from the control of limited promotion."
JWT...
The international advertising agency named Lala to its list of 90 things to watch in 2009, Lala is one of only 2 websites named to the JWT trend list.
CNet News...
"...no company has impressed more music execs than Lala.. Paying 10 cents to listen to new music doesn't sound very harmful does it?"
Filter...
"It's getting harder and harder to adopt new streaming technologies. Lala does a really good job... We were able to whip up a playlist of the bands playing our SXSW party with relative ease."
The New York Times...
"The site is refreshingly ad-free and offers some compelling features."
Los Angeles Times...
"(Lala's) main advantage is its slick software, which makes it just as easy to play songs from a 6-million-track Lala jukebox as from one's personal collection."
Fortune...
"LaLa.com CEO Geoff Ralston foresees a time in the not-so-distant future when most people will listen to music through their browser rather than downloaded software programs like iTunes that sit on a designated hard drive. 'The web is going to be the place where people consume music,' Ralston says."
BusinessWeek...
"What's interesting about this is that it's the first approach I've come across in a while that even attempts to make money by actually selling music."
CNet...
"...the first indispensable online music service since Pandora...the company has worked with the major labels to give users the right to access songs they already own without having to upload them... That's the whole dream of 'cloud computing' in a nutshell--once Internet access becomes ubiquitous, the differences between online and offline blur until the distinction eventually becomes meaningless."
Chicago Tribune...
"Ten cents may be a small price to pay for a little control."
San Jose Mercury News...
"I'm writing this column from a hotel room in Columbia, Mo., where I'm enjoying my own music, streaming to my laptop through the hotel's Wi-Fi network."
This is excellent. I can see why Apple bought them out.
The fact that I can pull up Lala anywhere and creat an iTunes-esque library of free music to listen to is great.
December 7th, 2009 at 10:15 AM - News by Brad Cook
Apple’s recent purchase of music streaming service Lala – not officially confirmed by either company but seen as a done deal by inside sources – may seem curious, but a source told Reuters: "Apple recognizes that the model is going to evolve into a streaming one and this could probably propel iTunes to the next level.”
On Monday, Ars Technica weighed in with some thoughts on why Apple made the purchase and what it will do with the company: “Apple has also been rumored to be testing a streaming service for video content; adding music to the menu seems like an obvious choice,” it said.
Looking closer at the situation reveals some interesting questions, Ars Technica went on to note: “If Apple is already testing a functional streaming service, there seems to be little need to buy an entire company to obtain similar technology. In fact, Lala uses Flash for wrapping its streams, and Apple has been notably averse to using that software for just about anything.”
In addition, Ars Technica said that there could be hiccups with Lala’s streaming license, which is non-transferrable and currently US-only, so Apple would have to enter into new negotiations with the music industry, as well as navigate licensing agreements in the many countries in which it does business.
However, Ars Technica mused that Apple could have wanted Lala for its engineering talent, as was the case with its PA Semi acquisition. Lala’s terms of service don’t obligate it to keep its site or services running indefinitely, and a New York Times report last Friday said that Lala approached Apple about the buyout because it wasn’t about to become profitable any time soon, which means Apple could have made the acquisition without putting much of a dent in a cash hoard that’s currently north of $20 billion.
Sun, Dec 6, 2009
Apple recently finalized a deal to acquire Lala, a four year old startup that lets users purchase and download songs or stream them from the cloud at a rate of $0.10 per song. The purchase may seem curious on its own, but may be a part of Apple’s broader efforts to make a concerted push into cloud computing, enhance the iTunes experience, and differentiate the iPhone from all other smartphones in the process.
Apple rarely acquires other companies, but when it does, the purchases are typically strategic with a specific purpose in mind. Buying companies wily nilly just because they seem cool or happen to be popular at the moment has never been Apple’s style. Apple’s acquisition of Lala, therefore, raises some interesting questions. The New York Times astutely points out that “ 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.”
So what gives?
Well, the Times notes that a person with working knowledge of the deal has indicated that Apple made the purchase not so much for Lala’s technology or business, but more so to acquire the talent behind the company and their cumulative expertise with “cloud-based music services.”
Which is interesting, because last February rumors circulated which had Apple working to implement a new iTunes feature that would allow users to stream their purchased media content remotely. The feature is, or was, known as “iTunes Replay” and reportedly worked as follows: Rather than transferring actual content from a computer to a device, iTunes would instead transfer a directory file with all of the pertinent metadata about the content a particular user has in their iTunes library. With that information in tow, users could then relay that back up to the “cloud” and subsequently stream the corresponding files back down to their device from Apple’s servers. This would enable the iPhone to achieve one of the holy grails of technology - endless storage. Or at least the illusion of it.
But all of that streaming would obviously require a ton of bandwidth, which brings us to part 2 of the puzzle - Apple’s ginormous data center in North Carolina.
This past summer, Apple hired Olivier Sanche, a former eBay Data Center executive, to head up operations at its planned 500,000 square foot data center in North Carolina. Apple’s planned data center is massive, and easily one of the largest of its kind in the entire world. To put things into perspective, Apple’s data center in Newark, California barely checks in at 100,000 square feet. Furthermore, Apple is planning to invest a staggering $1 billion dollars into the North Carolina data center, a figure which easily dwarfs the $500 to $600 million range typically used to set up large-scale data centers for the likes of Google and Microsoft.
Apple certainly needs beefed up infrastructure to handle things like iTunes content, MobileMe, and the juggernaut that is the iTunes App Store, but the sheer size and scope of its planned data center suggests that Apple’s plans regarding cloud-computing extend far beyond those services as we know them today. That, in conjunction with Apple’s recent purchase of Lala, suggests that Apple is planning to make a huge push into cloud computing sometime soon, and a streaming service like iTunes Replay may very well be at the center of that strategy.
Should Apple actually implement a streaming service into iTunes, it would certainly help Apple position the iPhone as the premeir smarthphone on the market, leaving rival manufactures scrambling to compete against an iPhone with limitless storage.
By John Timmer
Last updated December 7, 2009 6:21 AM
Last week's rumors have become this weekend's facts, as various sources are confirming a possible deal we discussed on Friday: Apple has purchased the music streaming service Lala. Right now, Apple's iTunes dominates the US music download sales, and does very well in many overseas markets, but the company has so far refused to experiment with any delivery model other than downloads. That will almost inevitably change, but the purchase of Lala isn't necessarily a sign that "inevitably" means "soon."
An unnamed source in a Reuters report made the case that Apple is ready to start streaming, saying, "Apple recognizes that the model is going to evolve into a streaming one and this could probably propel iTunes to the next level." As our original report noted, Apple has also been rumored to be testing a streaming service for video content; adding music to the menu seems like an obvious choice.
But if Apple is already testing a functional streaming service, there seems to be little need to buy an entire company to obtain similar technology. In fact, Lala uses Flash for wrapping its streams, and Apple has been notably averse to using that software for just about anything—it's certainly not displayed within iTunes as things currently stand.
And then there's the licensing issue. Various reports suggest that Lala's streaming license is non-transferrable, meaning that Apple would need to engage in additional negotiations with a music industry that has very publicly described its unease with Apple's dominance of download sales. Plus, each country that Apple operates in would involve a separate licensing agreement; Lala only had a license for within the US.
Finally, Lala wasn't turning a profit, and apparently wasn't on track to do so in the near future. It could easily be argued that Apple's brand name and advertising budget could change that, but the company has generally resisted jumping into markets where hardly anybody has figured out how to make money (instead, it tends to go after profitable but heavily fragmented markets and defragment them).
So, it's difficult to see anything tangible that the acquisition provides Apple. The alternative take, one that a different unnamed source fed to The New York Times, is that this acquisition follows the PA Semi model. In that case, Apple bought a fabless PowerPC design firm, but not with the intention of actually using any of its existing products; instead, all indications are that it simply wanted access to the engineering talent, which it's now deploying to provide improved ARM chip designs for future portable devices.
The Times' source suggests that Apple is simply after an engineering team with extensive storage and distribution skills. In addition to its current streaming offerings, Lala allows users to upload their existing music collections and then gain access to the songs from anywhere with Internet service (although the music companies have reportedly limited that feature). There are any number of existing and rumored Apple ventures that this sort of expertise might improve.
Apple could probably get the engineering team at a price that wouldn't put much of a dent in the company's $23 billion pile of cash. Lala was privately backed, and, as reports indicate that profits were not in its immediate future, its backers may simply have lost interest in waiting for them. More generally, streaming and subscription services haven't gained much traction in the market, so there's a real danger that "not any time soon" might mean "never."
Lala's terms of service also indicate that it "is not obligated to support or update the Site or Services," meaning that Apple can back out of the streaming market with a minimum of fuss if it chooses to do so.
On balance, the purchase appears to give Apple the chance to bring in engineers that will be useful now, and could be even more so if it chooses to enter streaming or subscription services. But, for the moment, there's nothing about the purchase that seems to provide the company with any key technologies it was missing in terms of diving into markets. Until another company demonstrates that there's money to be made (or iPods to be sold) through streaming, there's no reason to think that a move of this sort is imminent.
In any case, Apple is clearly following the PA Semi model in one regard. Its spokesman is simply stating that Apple buys small companies from time to time, but has no interest in explaining what it's doing with them.
by Peter Kafka
Posted on December 7, 2009 at 10:49 AM PT
On Friday, I reported that Apple was buying Lala at a fire-sale price, which meant that investors in the music service wouldn’t get their money back. I was wrong.
Apple ended up paying around $80 million for the company, according to multiple sources. That’s less than half what investors valued the company at in 2008, but it’s more than the $35 million the company raised throughout its life. Which means that some investors could get their money back and more.
But not all of Lala’s investors. Warner Music Group (WMG), for one, ended up getting back about half the $20 million it put into Lala, I’ve confirmed with people familiar the company.
That’s consistent with the $11 million write-down Warner took on its stake back in March. But it’s also confusing. Most venture deals include a clause that gives investors the right to get their money back–often with a premium–before anyone else gets paid following a sale. So any price of $35 million or more should have paid back the music label in full.
I’ve asked Warner for comment, but haven’t heard back. I’ve also reached out to co-investors Bain Capital Ventures and Ignition Capital. Apple (AAPL) spokesman Steve Dowling offered up his now-standard line on the deal: “Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans.”
Warner executives can at least say that they did better on Lala than they did with Imeem, a rival digital music service. Warner lost all of the $15 million it put into that one, which is being acquired by News Corp.’s (NWS) MySpace.
And the Warner guys can also tell themselves that employees from a company they once backed are now working at Apple, which can’t hurt.
Meanwhile, the Lala team, which should begin reporting to Apple today, gets credit for selling the company at any kind of premium at all. It’s not a home run, but it’s much better than it could have been.
The start-up has gone through multiple iterations, and its most recent was a streaming music service that sold access to songs for 10 cents apiece. But despite a recent promotional deal with Google (GOOG), the company appeared unlikely to succeed on its own.
Silicon Valley chatter is that founder Bill Nguyen, who spent six months in Hawaii this year trying to launch another start-up, and CEO Geoff Ralston had become weary of the same problems that have bedeviled other music start-ups. So they were looking to land Lala at a larger entity.
One thing that helped the company extract a decent price is that it had $10 million cash on hand, say sources who’ve seen the company’s books. That meant it didn’t have to sell immediately.
But Lala’s real asset was its technology team: In the end, Apple bought the company to get its hands on its engineers, who had built a slick streaming service as well as an iPhone app, which Apple has yet to approve.
If you’re feeling glass-half-empty, you can note that Lala’s $80 million price tag is a big comedown from the $200 million investors thought the company was worth a couple of years ago. But if you’re feeling more generous, you can conclude that any kind of return is worth noting.
The last big exit for a digital music company happened way back in the spring of 2007, when CBS (CBS) paid $280 million for Last.fm. But no one has gotten anything close to that for digital music since then. Imeem is being sold for spare parts, and News Corp. also bought iLike at a steep discount. Spiralfrog filed for Chapter 11 after burning through its cash.
But people are still trying. Pandora Media raised another $35 million this summer after a royalty deal helped breathe life into the Internet radio company.
Meanwhile, venture-backed MOG, whose investors also include some music labels, has just launched a streaming music service of its own. And Spotify, the European music service, has raised a pile of money and generated much more hype, though it has yet to land in the U.S.
Maybe one of them will get it right.
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Interesting. This cloud-based music library fits with the Google Chrome OS concept of all access via a browser and all content in a cloud.
So would this mean I can load my library into the cloud and be able to stream all of my music to an iPod Touch or iPhone? Because that would be pretty cool, especially for those of us with more music than those devices have space.
So would this mean I can load my library into the cloud and be able to stream all of my music to an iPod Touch or iPhone? Because that would be pretty cool, especially for those of us with more music than those devices have space.
I can't say for sure, but I think there is a way to stream your music to your iPod Touch or iPhone from your library at home. But, I vaguely remember reading about it, so I can't give much in the way of details.
But, as for Apple's intention right now... I think it's still a guessing game.
As much as I like OS X and my Macbook I am not going to put any of my files on any “cloud”, period!
By Erik Sherman | Dec 7, 2009
When it comes to understanding consumers and what they will want, Apple is one of the strategically smartest companies in the world. And the recently reported deal to acquire music streaming start-up Lala is another indication that the company is planning to become the central cloud for consumers. That raises some interesting questions about what the future of the company might be, because focusing on the cloud means realizing that business is beyond proprietary hardware and software. And the answer may be a clever marriage of open and closed, promoting Apple hardware and eventually making it king of the personal computer heap.
Why Apple might want a streaming company is head-scratching, in an odd kind of way. It should be crystal clear. An important business to them is selling access to downloading songs. Streaming media is a natural counterpoint, because there will be people who want the equivalent of a radio station, with a larger variety of music than the typical collection, and streaming should also lead to additional track sales. And if you can stream audio, why not video or e-books or any kind of media?
This would also seem to logically tie to the big server farm that Apple is building in North Carolina, potentially taking advantage of upwards of hundreds of millions in tax breaks should the facility hit a billion dollar investment and operate for 30 years. But the odd thing is that streaming specifically, and cloud-based services in general, presumes that you are using standards-based technology to cast as wide a customer net as possible. And that just doesn’t jive with Apple’s entire approach to business: tie people in to proprietary hardware and software, own as much of the monetary and IP value as possible, and control (via mechanisms like the app store) what you don’t own.
How do you reconcile the proprietary and the open? I have a suggestion. As I noted back in May, there are multiple reasons why Apple would want a big server farm: for example, making games and e-books available, mirroring the developments and interests that the company has shown. But as I said then, Apple has shown that it’s willing to give something, like an iPod, to help close the deal on something bigger, like a Mac. So why not give away web-delivered services as an inducement to buy hardware.
But then, last month, we saw that Apple filed a patent on a way to force people to watch ads and which could be used to let a user obtain “a good or service, such as the operating system, for free or at reduced cost.” Time to tie it all together.
You have streaming media, enforced ad-watching, and rumors of the new cheaper device coming out. So add it all up. How about advertising-supported streamed media that also ties in to subsidized hardware? And don’t assume that the media is just music. It’s “open” in the sense of being a available anywhere and at a price that would make a whole lot of people jump, and yet “closed,” because consumers would be tied to Apple.
Suddenly, you have a consumer device that could drop down to just above the going competitive rate of the current e-book readers (because Apple’s long-term business strategy has always called for premium positioning) that is possible because of the advertising. Add a deal with a company like Zoho, and you could have something that offers consumer and business servers, delivered via web to reduce the cost of the device, and use subsidies to make the product inexpensive enough that huge numbers of people jump on it.
It’s not a no-brainer because there are potential roadblocks. For example, Comcast’s acquisition of NBC Universal could keep Apple from nailing TV subscription plans via iTunes. But could Apple have finally found the formula to become the leading seller of a computing device, in profitability as well as in unit shipment, and undermine the entire Microsoft universe? It may just have.
As much as I like OS X and my Macbook I am not going to put any of my files on any “cloud”, period!
Now, as to exactly what Apple is going to do with Lala is sorta up in the air. But, what you are saying -- I don't think even fits into what Lala is and/or what Apple is doing (or what various pundits say Apple is doing)...
If I understand you right, when you say put your files in the cloud, you're talking about your personal data and like-files -- and I can understand that. But, Lala never had anything to do with that idea. They are about music, from what I can see.
I think this has to do with iTunes and music rather than your personal files, actually.
That might very well be the case. However, when I see the word “cloud” regarding any internet/computer service, I start walking away, carefully :)
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