NEWS ANALYSIS: Apple's acquisition of the digital music streaming site Lala suggests Apple is getting ready to reposition iTunes to offer a music streaming service.
The confirmation by Apple that the company purchased the music streaming
site Lala, which boasts just 100,000 customers by Lala's own count, raises the
question, Why? After all, Apple's iTunes music application offers more than 11
million songs and is the leading digital music retailer with more than 70
percent of the digital music market in the United
While iTunes is far and away the market leader, digital music sites like
Internet radio company last.fm; MySpace, which has repositioned itself as a
musician-friendly Mecca; and U.K. service Spotify offer free streaming of full
tracks selected specifically by the user-something iTunes doesn't yet offer.
Indeed, a survey by Music Ally, which carried out a study with the media and
technology research company The Leading Question earlier this year, found 65
percent of teenagers are streaming music.
Apple Care Specialist and President of Boston-based Tech Superpowers Michael
Oh said Apple, which has dominated the digital download market for years, may
now be looking to capitalize on the music streaming market-one Oh said has been
the only type of digital music service that has been able to gain traction,
either through subscription-based or ad-supported models.
"While people continue to like the idea of owning music and having it on
their computer, in one sense the streaming side of the business is much more
interesting," he said. "Looking at the U.K.
as a little microcosm, what I've seen is traditionally within office
environments, Spotify-available in the U.K.
and a handful of other European countries-has replaced all other services for
this particular use, where people just want to listen to something, and not the
same old tracks."
No matter how large a playlist may be, people will continue to want to hear,
and share, new music, Oh argues, and being able to choose your own tracks is
essential to the market uptake for streaming. "Once people have the ability to
choose their tracks, then they don't seem to care whether they offer that music
or not," he said.
However, Oh notes that the other piece of digital streaming success stories
is the ability to lure customers into buying that music once they've streamed
it. "It is quite interesting how there's a direct tie between new music that
you like and still wanting it mobile, so you'll actually end up downloading
it," he said.
Lala, which recently inked deals with Google and social networking behemoth
Facebook, offers a library of 8 million songs, which it allows its users to
stream once for free, and also sells unlimited streams for 10 cents per track
and MP3 downloads starting at 79 cents. In comparison, Spotify boasts a library
of approximately 6 million tracks, while iTunes offers 11 million tracks and
sells individual MP3s for $1.29.
Oh said Apple may have chosen a relatively unknown service like Lala as
opposed to a company like Spotify because licensing issues are a major factor
for these services, and if all Apple needs is a technology it can easily
integrate with, it doesn't need to waste time duplicating an effort it has
largely made on its own.
"For Apple, the fact that something is established doesn't mean much," he
said. "I think Apple is seeing streaming as how the music industry is heading,
and they may just want to hedge their bets."