Apple buys Lala, 'cloud' provider of music
Consumer technology giant Apple (AAPL) has taken a big step into the Internet "cloud" by purchasing streaming music company Lala, a deal that some industry experts value at under $35 million. According to The Wall Street Journal, Apple, which already commands a big share of the music industry with its iTunes music service, "could either find a way to adapt Lala's Web song offerings or it could incorporate the startup's technology in a subscription service of some kind." Lala currently allows its customers to rent songs at $0.10 each to be streamed to their handsets.
Apple's iTunes allows customers to buy songs and download them to their computers or iPods. Once the iTunes user has the songs, and in some cases movies, he owns them forever. The model has done well, but it's incomplete. Many people want to stream music any place and any time to any connected device. That allows digital consumers to rent music, which is then sent to them over the Internet "cloud" where it is stored on remote servers.
With the Lala purchase, Apple may choose to use the technology, or it may simply be buying a competitor with new technology just to keep it out of the hands of another company. In all probability, Apple sees that iTunes has a weakness and that forcing people to pay for multimedia content that's downloaded permanently and sit on hard drives may not always be the preferred method for electronic content consumption.
Apple may decide, or may have already decided, that streaming media over the Web from servers is a model that will become more popular over time. At a dime a song, it certainly makes music consumption inexpensive.
Already dominating the music industry in a way that troubles music publishers and movie studios, Apple's market share allows it to largely dictate what consumers pay for multimedia content. If the Lala deal allows Apple to greatly expand its customer base, the media companies may face the disappearance of whatever small leverage they still have with Apple. It's a case of the owner of the device and the "pipes" to the consumer winning and the content producer losing.