lala and apple – what could it mean?

Posted on December 12, 2009


Barry Levine, Barry Levine, – Fri Dec 11, 1:02 pm ET

Having transformed the music business once with iTunes and iPods, Apple is getting ready to do so again with a web-based service, according to a new report in The Wall Street Journal. If so, the influential online music store could again change the industry by changing what it means to own a song.

About a week ago, Apple bought music-streaming service Lala in a move that was widely interpreted as signaling the computer maker’s intent to make streaming music a key part of its iTunes Store. According to the Journal’s unidentified sources, Apple plans to transform at least some aspects of the store into a browser-based service.

Cloud-Based Content

Music-streaming services like MySpace Music and Spotify have started to gain a large following. There has also been a lot of activity and discussion by movie studios and TV networks who want to avoid the crisis that digital distribution caused for the music industry.

Disney, for instance, has developed its Keychest technology, where “buying” or “renting” a movie means users have access to that content on a streaming server in the cloud. Users can then access the content, with whatever time or viewing constraints are included, from any compatible device.

Comcast’s TV Everywhere initiative is exploring a similar approach, as are other content giants.

To date, the iTunes Store model has been downloads. With more than 11 million titles, the store has been phenomenally successful since its launch in 2003. It has been spearheading the reinvention of the music business in the digital age, so a change in its model could have a major impact.

Lala’s model has been to stream any of its more than eight million songs. The first stream of a title is free, with unlimited streams for a dime. For 60 cents to $1.29, the user can have an MP3 download as well as unlimited streaming. Users can listen to the streams from any compatible device via a browser.

‘Webification of iTunes’

But Lala hasn’t been profitable, and some industry observers speculate that Apple’s purchase was more about buying experienced engineering talent than technical rights, content or market share.

Brad Shimmin, an analyst with Current Analysis, said the impetus for possessionless ownership of content is modeled after cell-service providers, where temporary ownership of a service or content is common. Apple, he added, is now closer to the “webification of iTunes.”

With the steps toward creating a streaming service, Shimmin said, Apple appears to be “creating more options for itself than simply being a vehicle for RIAA.” RIAA is the music-industry rights-management group, the Recording Industry Association of America. Among other things, he said, music access from anywhere could present new ways in which users can share their music experiences, an area in which Apple has had limited success.

“Content in general is moving in this direction,” Shimmin said, as markets become more connected through very fast transmissions. At the moment, he added, traffic congestion on the Internet could be an issue, but not “over the long term.”

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