Apple has just pulled a competitor into its fold and set the stage to transform its iTunes Store. The company has confirmed the acquisition of Lala, the first free music service without advertising.
The terms of the deal weren't disclosed, and Apple wasn't immediately available for comment.
Lala offers its customers Internet access to a music library such as iTunes. When it launched in October 2008, the site set out to replace what its founders viewed as an outdated approach to uploading MP3 files from a PC. Lala uses licensed technology to instantly match songs from a consumer's personal music library with the web-based catalog on lala.com.
In competition with iTunes, consumers can also sample any full song or complete album free, add songs to a web collection for 10 cents, or buy DRM-free MP3 downloads for an additional 79 cents. Lala drew cooperation from EMI Music, Sony BMG Music Entertainment, Universal Music Group, Warner Music Group, and more than 170,000 independent music labels -- and now it has the attention of Apple.
Browser-Based Music Access
Behind Lala is a team of engineers who developed other hit Internet services and platforms like Yahoo, eBay, Blogger and AOL. The group is lead by Geoff Ralston, who serves as CEO of Lala. Ralston launched Yahoo Mail, and seeks to make music as accessible to consumers as e-mail.
One of Ralston's quotes when he launched Lala could point to how Apple plans to integrate the company into its musical assets: "We live our lives in a browser, whether it's e-mailing, watching television shows, or using Facebook. When I launched Yahoo Mail, few thought hundreds of millions would depend on web e-mail. My music belongs online in the same way. Will there be anything without a browser in five years?"
With Ralston's comments in mind, some are speculating that Apple could be preparing browser-based access to iTunes content. UBS Investment Research analyst Maynard J. Um said in a note to investors Monday morning that Lala gives Apple browser-based technology to access music anywhere.
"We believe the Lala acquisition fits into our view that Apple is building a data center for a service to provide seamless access & mobility of digital content across all of its products, including media-focused content of iTunes and user-generated content of MobileMe," Um said in a published note.
The iPod Connection
This acquisition underscores that online and mobile services are at least as important as applications, according to Michael Gartenberg, a vice president at Interpret.
"The Lala purchase gives Apple some differentiated service offerings that help make its devices stand out from the crowd at this point," Gartenberg said. "This service potentially allows you to stream your iTunes library from everywhere and offers new models for purchasing music."
Apple's acquisition of Lala also shows how much the market has changed, Gartenberg noted. Instead of synching content physically hosted on a consumer's computer over a cable to another device, Lala offers services and applications that drive functionality.
"Lala will probably be integrated into future versions of iTunes, and future versions of the iPod and the iPod application on the iPhone that can provide differentiated functionality," Gartenberg said. "We'll have to see where Apple takes it. They could take it in any number of different directions."