USA Today: Apple buys Lala, entering the streaming music business

By Jefferson Graham, USA TODAY
Maybe music consumers don’t have to own their songs anymore.

After years of resisting efforts to offer music fans the ability to “rent” music instead of buying downloads, Apple is finally joining the party.

Apple’s (AAPL) purchase of online music service Lala brings the No. 1 music retailer into the streaming music business. Apple declined to discuss its plans for the service, and Lala officials didn’t respond to requests for an interview.

However, music industry analysts say the purchase is Apple’s realization that it needed to be involved in the “cloud” computing movement, which could eventually bring major changes to the iTunes Store.

“The idea of paying 99 cents a track to fill my iPod – I don’t need that anymore,” says Ted Cohen, a managing partner at TAG Strategic, a music industry consulting firm. “That era is over.”

For years, the music industry has advanced subscription services such as Rhapsody and Napster, saying they made more sense for the consumer and better profits for the labels. But the services have yet to find sizable audiences and, in fact, are losing subscribers.

But what has changed is the popularity of free streaming services, led by Pandora, which has 40 million monthly listeners worldwide. You can’t choose specific songs, but you can choose your favorite artists. Pandora then creates a music experience for you with similar-sounding music. Pandora is widely popular on the Web and on smartphones, including the iPhone.

Lala differs from Pandora and iTunes in that you pay to listen to online streams – at 10 cents a pop – instead of buying the song outright. Lala also lets you transfer songs from your hard drive to a Lala online locker, making the songs available for listening in other locations – say, via an iPhone, potentially.

It’s the locker that made Lala interesting for Apple, believes Paul Resnikoff, editor of the blog Digital Music News. “This expands how Apple delivers music,” he says. “You’re on a layover in Kansas, want to tap into your music collection and listen to some songs on your iPhone, and there they are.” If you like what you hear, Apple can sell you more music on the spot.

Other services offer similar features already – most notably Rhapsody – “But maybe Apple wants to do it themselves,” says Resnikoff. “What they’re doing is buying into a technology and engineering team and piecing together what the next step is.”

Lala started in 2005 as a CD-swapping service before shifting to music streaming. It got a major boost in November when Google chose it (and MySpace’s iLike) to power its new OneBox service, offering free one-time listens to songs directly in Google’s search results. Lala doesn’t charge for that service.

Inside Digital Media analyst Phil Leigh believes this feature is primed to take over the role radio once held in helping music consumers find new music.

“There’s no doubt this will become the successor to radio and be how new music will be popularized,” he says.

Posted by Ted • Tuesday, December 8, 2009 .