Apple Buys Lala, Vevo Launches

Several news organizations confirmed late last week that Apple had purchased streaming music service Lala.com in what some some were calling a new approach to iTunes.

From the time that Apple bought Soundjam in 2000 and transformed it into iTunes, the software program has been focused on local music collections that have been ripped, or added to, the local machine's iTunes library.

With the advent of the iPod, music from the iTunes library could be listened to on a portable device, and additional music could be purchased on the iTunes store, for download to the local computer and subsequent synching to the iPod. Other solutions emerged for synchronizing iTunes libraries, such as Syncopation by Sonzea, but rights-protected content could not be moved between libraries, although it could be played on several iPods.

Even as Apple made advances in allowing streaming of an iTunes library to other local iTunes-equipped machines, or via the Airport Express Wi-Fi access point, the company still firmly entrenched its out-of-home listening approach as a download-and-listen solution.

Lala.com, on the other hand, started as a CD-swapping service and then moved to a storage locker model, akin to the old MP3.com, before finally settling on a stream-as-you-go service that allows its listeners to use credits to listen to songs for as little as $.10 per song. The credits, bought in bulk to limit transaction costs, can also be applied toward the purchase of songs at $.89 per song.

One of the key features of Lala.com is its ability to combine the cloud-based storage locker model with streaming delivery. A user's library is uploaded to the cloud, where it is cross-referenced against songs that Lala has available for purchase or playback; any song that has been uploaded from the user's hard drive is available for unlimited playback.

Songs not owned by the user are available for a free first listen, via a partnership with Google, and then must either be purchased or rented (streamed) for additional listening. Since Lala.com is a cloud-based service, it can deliver streams to desktops, laptops, and portable devices, and it caches a certain number of songs on the listener's device so that offline listening is also possible, within some limits.

This last point is key to user adoption, as many users want to access their music wherever they are, but may not have the capacity on their portable device to store all their music files. A streaming-only service, however, would penalize those who may choose to travel outside the confines of a data network, be it a home Wi-Fi network or even a cellular provider's footprint.

"Consumers shouldn’t have to worry about where their files are, they should be able to play their music," said Lala co-founder Bill Nguyen, in a recent Wired interview. "It’s actually a huge benefit for the labels, because once Lala knows the music that you listen to, it makes perfect sense to say, ‘Hey, Wilco has a new album coming out.’ We’d only know that if you’d uploaded it or listened to it on our system."

All of these features have been discussed as possible motives for an acquisition of Lala.com by Apple, with various reporters and pundits taking different approaches to an Apple-Lala synergy.

Wired suggests that Lala's bundle-payment setup, where users buy stream credits, could save Apple's iTunes Store millions in credit card fulfillment charges. The Unofficial Apple Weblog notes that the deal is expected to put Nguyen and the Lala engineers on Apple's payroll, and the New York Times also considers this a talent acquisition, in part because the newspaper states that Lala's streaming agreements with the major labels are non-transferable.

Peter Kafka of All Things Digital's MediaMemo said he's uncertain what Apple is buying, but that the move may be both opportunistic and pre-emptive.

"Warner Music Group (WMG), which had previously invested $20 million in Lala, wrote down $11 million of that," said Kafka, noting a devaluation of investments in Lala.com that occurred several months ago. "What’s unclear is exactly what Apple has bought. . . . . While the service recently got a boost via Google’s new music search offering, where it’s one of two featured partners, it doesn’t have a huge customer base to sell, which means Apple could be interested in acquiring its technology and/or team."

Ryan Nakashima, an AP writer, called out the "intelligent caching" feature and noted that "Nguyen demonstrated to the AP a working model of an application the company had developed for Apple's iPhone, which is not available to the public, allowing users to buy the right to stream songs from a digital locker for an unlimited time on their iPhones for just 10 cents each."

A Hulu for Music Videos?
The whole Apple-Lala discussion also plays out against a backdrop where several other online music solutions—such as imeem, which was acquired to complement MySpace—have been sold at discounted prices, while others are just emerging.

Vevo.com is an example of a company that is emerging. This joint venture between YouTube and Universal Music Group is set to launch on December 8. The site has been posting short excerpts of YouTube videos that lead to clues for what Vevo is, including one blog post today that touted Vevo's Go Show.

"Imagine you’re trying on some new kicks," the blog post reads, "and all of a sudden one of your favorite musicians walks in with a DJ in tow and rocks the house like it was Madison Square Garden. Well that’s what happened when Wyclef Jean rolled up to a Timberland store in downtown Manhattan and played an impromptu performance. Oh and guess who was there to film it. We’re calling this a Vevo Go Show—expect many more of these."

"The rationale is to help make Vevo a place that brands feel more comfortable," Rio Caraeff, Executive VP of Universal’s eLabs, said in a recent interview."Ultimately we think it will increase in effect the CPMs and drive more revenue to YouTube and more revenue to the music business than they can have today."

One thing that is, as of yet, uncertain, is whether Universal can attract other music labels, some of which have shied away from YouTube based on either financial or quality concerns. Universal had hoped to have all four major music firms on board before launching Vevo. Sony signed on for an ownership stake, and EMI announced Monday morning that videos from its artists would be available, leaving Warner Music Group as the lone holdout.

[Update: Lala.com's sale price was initially thought to be quite low, given Warner Music Group's recent write-down of more than half of its initial $20 million investemnt. Turns out the price was a bit higher than anticipated; more details are available at Tim Siglin's BitOfTech blog.]

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