Apple Has Acquired Lala

Earlier today we covered rumors that Apple was in talks to acquire streaming music service Lala. Now New York Times tech reporter Brad Stone has tweeted that it’s a done deal. He writes, “Apple has acquired digital music startup Lala. Now updating our story”. You can find the NYT story here.

This could be bad news for Lala users. It’s unlikely that the innovative deals negotiated by Lala will survive through the acquisition. For over a year, Lala users have been purchasing the rights to stream their music an unlimited number of times for ten cents per song. If the deals with the music labels go up in smoke, Lala may lose the right to stream those songs. In other words, all the money users have been spending on web songs may go down the drain. If the deals are nullified, hopefully Apple will renegotiate them to at least cover existing purchases until it releases its own streaming music service. We’ve reached out to Lala but have yet to hear back.

Likewise, this may well affect the Lala music gifts that have been recently offered by Facebook, and it could also harm the Music OneBox service Google recently launched (though Google can still rely on MySpace/iLike for its song streams).

Stone writes that Apple is interested in Lala because of its engineering talent and technology, and that it was Lala that initiated the discussions. From the Times:

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.

This person said Apple would primarily be buying Lala’s engineers, including its energetic co-founder Bill Nguyen, and their experience with cloud-based music services.

The deal makes sense. It seems inevitable that Apple will eventually launch its own cloud-based streaming music service. And that’s exactly what Lala is — an iTunes in the cloud, with some interesting pricing mechanics.

A few other interesting things to note. This acquisition comes a little more than a month after Lala was integrated into Google’s OneBox and Facebook’s gift store. Lala may well have been viewing these launches as last-chance efforts to find a path to profitability. Given these reports that Lala’s “prospects for turning a profit in the short term were dim”, it looks like those launches may not have gone as well as Lala hoped.