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Apple Shutting Down Music Service Lala

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The online guessing game of "What Will Apple Do Next?" took a new turn this morning, as Apple made the decision to shut down music service Lala. Apple acquired the company in December, 2009, leading to speculation that Apple would soon include music streaming on iTunes.

According to the Lala site, the service will shut down on May 31, and is no longer accepting new users. Lala made a name for itself by offering music streaming, inexpensive music purchases, and online music storage. The company was likely never profitable.

The iTunes Store has always exclusively sold downloadable tracks and has never offered a streaming component. This move suggests that iTunes is moving to a cloud-based system, where users can access their files from any device. Apple could also introduce ad-supported free streams.

Or the move could simply be for economics. An article on CNET written around the time of the purchase said, "Apple managers are very interested in working with Lala's engineers, who have come up with 'a payment and fulfillment system that could save Apple millions of dollars a year.'"

The smart money, however, is that iTunes is evolving, and we'll see its next phase this summer, perhaps around the time of Apple's Worldwide Developers Conference in June.

"Throughout its run, Lala tried a wide mix of models, including trading and selling CDs and MP3s, a music locker, and finally hosted Web songs that would stream on demand. As iTunes’ user interface and previews have been becoming more tied to the Web, there is an opportunity to turn it into a full Web application, complete with a hosted library, carrying forward what Lala built," says Ross Rubin, consumer technology analyst with the NPD Group.

"The iTunes model hasn't changed much since it was introduced in 2003 and still primarily revolves around local downloads to specific devices. Offering iTunes users the opportunity to access their music, videos and other media via a cloud-based online service would give iTunes a needed facelift, and would drive usage of Apple's growing stable of connected devices. Longer term, it could also rejuvenate Apple's living room play as part of a larger multi-screen strategy where Apple TV has failed," adds Susan Kevorkian, mobile media and entertainment analyst with IDC.

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