Swirling rumors that Apple is acquiring streaming music service Lala have apparently been confirmed. In independent updates from New York Times tech reporter Brad Stone and AllThingsDigital blogger Peter Kafka, the four-year-old service has been bought by Apple. This deal will potentially allow Apple to do full-song streaming through iTunes and Pandora-like streaming radio on computers, the iPhone, and the iPod touch: anything that can run iTunes.
Lala allows users to listen to any of the 8 million songs in its library once for free, or to stream an unlimited number of times for 10 cents per track. Tracks can also be downloaded in MP3 format for 79 cents per file. It’s unclear whether the licensing deals that Lala negotiated will survive the acquisition, so it's possible that Lala users who have paid for access to streamed tracks will lose that access forever, unless Apple renegotiates Lala's licenses to cover existing purchases until it releases its own streaming music service.
The Times's Stone wrote that Lala initiated the negotiations once it was clear to them that they'd be unable to turn a profit, and that Apple was interested in bringing Lala's engineering talent and technology into its own iTunes unit.
One person with knowledge of the deal, but who was not authorized 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.
Other observers - such as an anonymous "industry source" contacted by Silicon Valley Insider - worried that Apple was buying Lala to put a potential competitor out of business.
One industry source with years of experience in the digital music business is very surprised by the apparent deal. “I would be completely shocked,” he says. “None of the licenses are transferrable (not that Apple has a hard time getting licenses). Why would they buy it? Again, I’d be shocked."
This wouldn’t be the first music start-up Apple has purchased. In 2000, it bought a music player application called SoundJam MP. It formed the core of the first version of iTunes, and its developers helped build subsequent versions of that software.