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Apple close to acquiring music streaming service Lala - report

post #1 of 56
12/4/09 at 1:20pm
Thread Starter 
Apple currently in "advanced" acquisition negotiations with the music streaming Web site Lala, as part of a deal that could bring full streaming songs to iTunes.

Citing two anonymous sources with knowledge of the discussions, CNet reported Friday afternoon that an agreement between the two parties could be imminent. Parties with both companies declined to comment.

"Exactly what Apple intends to do with Lala remains unclear, but it would appear that Apple intends to offer some kind of streaming service to iTunes users," the report said. "Right now, Apple is the largest music store online or offline and Apple has made more money than any other music service by selling music downloads."

Weeks before its $750 million acquisition by Google, Apple reportedly met with mobile ad service AdMob. The nature and extent of those discussions remains unknown.

Apple has been described as awash in cash as it has accrued a massive $31.1 billion in cash and investments. That number, up 27 percent from a year prior as of August, is the largest net-cash sum of any technology company.
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post #2 of 56
12/4/09 at 1:26pm
The Zuning of the iPod?
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post #3 of 56
12/4/09 at 1:31pm
A great move by Apple, which will hopefully lead to a streaming component for music via iTunes/iPods/iPhones, and also allow free full-length previews of music and even full albums.

I just signed up for LaLa.com after reading about this news regarding Apple today, and I'm quite impressed!

Free Christian Music

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Free Christian Music

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post #4 of 56
12/4/09 at 1:41pm
An acquisition by Apple like this is interesting. From a technological standpoint, I doubt LaLa has anything Apple couldn't build on their own. But the music industry might be preventing Apple from signing new streaming contracts, so Apple might be end-running them to buy someone who has those long-term deals already sewn up.
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post #5 of 56
12/4/09 at 1:55pm
Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!
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post #6 of 56
12/4/09 at 1:56pm
I'd like to see them do something more significant with all that cash they are sitting on.
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post #7 of 56
12/4/09 at 2:01pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!

Technically it is not just sitting in the bank. Apple set up a shell company called Braeburn something something. It is a front for "investments", money laundering and such.
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post #8 of 56
12/4/09 at 2:04pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!

Agreed, and not to sound flippant bc you make a very good point, but my bet is that Apple has a few more 'better ideas!'
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post #9 of 56
12/4/09 at 2:05pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!

Well, this is also the same company that was nearly out of cash in the mid 90s. A few people (Steve) probably remember that.

But you're right. Up until now, Apple's strategy has been smaller acquisitions that have the potential of many multiples of return for their investment. They could certainly make a big play with their cash right now (Adobe, heck even Dell) but neither would be a good long term investment for Apple's space. A dividend might be the only way to make the Street happy long term.

And keep in mind that Apple was a dividend company back in the 1980s. They eliminated the dividend to save cash as their fortunes soured in the 90s.
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post #10 of 56
12/4/09 at 2:06pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

For Apple to succumb to that pressure would be dumb, and that, they are not. Perhaps a one-time 'special' dividend, or a massive share repurchase would be OK, but to initiate a regular dividend payout could have disastrous signaling consequences.
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post #11 of 56
12/4/09 at 2:07pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!

Someone hasn't been following Apple for very long, apparently.
Either that, or they don't know how certain innovative companies lead the pack and stay one step (or so many more) ahead of their competitors. Don't count on Apple to pay dividends.
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The true measure of a man is how he treats someone that can do him absolutely no good.
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post #12 of 56
12/4/09 at 2:08pm
Quote:
Originally Posted by Johnny Mozzarella View Post

I'd like to see them do something more significant with all that cash they are sitting on.

Why? What are they not doing now that they should be?
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post #13 of 56
12/4/09 at 2:10pm
Quote:
Originally Posted by teckstud View Post

The Zuning of the iPod?

Think how many matte screens you could buy with $31 billion or how many flash units you could buy to help the iPhone camera?
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post #14 of 56
12/4/09 at 2:12pm
Not only do they stream music on a commercial-free platform, but Apple could be interested in Lala for their social-networking features as well.
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post #15 of 56
12/4/09 at 2:16pm
Quote:
Originally Posted by Sevenfeet View Post

An acquisition by Apple like this is interesting. From a technological standpoint, I doubt LaLa has anything Apple couldn't build on their own.

I agree. But since 90% of the work is already done for them maybe they just don't have the resources to build something like LaLa quickly enough. They're too busy working on 10.7 Clouded Leopard... which is starting to take shape when you consider this purchase, the datacenter in NC, MobileMe, etc...
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post #16 of 56
12/4/09 at 2:34pm
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Originally Posted by bbwi View Post

I agree. But since 90% of the work is already done for them maybe they just don't have the resources to build something like LaLa quickly enough. They're too busy working on 10.7 Clouded Leopard... which is starting to take shape when you consider this purchase, the datacenter in NC, MobileMe, etc...

Or, they're also preempting yet another IP lawsuit that will arrive down the road if they 'made' rather than 'bought.'
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post #17 of 56
12/4/09 at 2:35pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

Embarrassing? Youre right its so much less humiliating to be hemorrhaging money and running into the red constantly. If being successful and pragmatic is embarrassing colour me embarrassed.

First of all, $31B isnt really that much. Didnt Apple paid out a half billion earlier this year for NAND from Samsung and another huge lump sum for LCD screen for LG? All for future products. This gets them good component rates. You cant do that if you have supply them an IOU or wonder if you do pay them what youll have to do to be able to pay your other bills.

As a stock holder I appreciate a company that isnt acting like someone living week-to-week spending all their money as soon as they get it. With the volatility of the marketespecially with tech stockshaving a huge financial anchor to weather the storm is a good thing for stock holders. Frak some silly dividend. Any one getting into Apple knows not to expect them or tey shouldnt be trading in the market.

Also, MS had a reported $51B at one time, if I remember correctly, and they may have had a smaller market cap than Apple has now. That amount has been decreasing each year and is lower than Apples.
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post #18 of 56
12/4/09 at 2:37pm
The pressure has been on Apple to pay dividends for years. It, however, is not going to happen. Apple remembers the lean years. Having that cash allows it to keep innovating in a down economy. It also would allow it to weather a decline in sales. It also uses that cash stock pile to make large advance purchases of supplies like Flash memory, and acquire small innovative companies. Further, there is freedom in not having to worry about paying the bills.

MIcrosoft offered a dividend. The stock has been stagnant ever since.

Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!
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post #19 of 56
12/4/09 at 2:42pm
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Originally Posted by TBell View Post

The pressure has been on Apple to pay dividends for years. It, however, is not going to happen. Apple remembers the lean years. Having that cash allows it to keep innovating in a down economy. It also would allow it to weather a decline in sales. It also uses that cash stock pile to make large advance purchases of supplies like Flash memory, and acquire small innovative companies. Further, there is freedom in not having to worry about paying the bills.

MIcrosoft offered a dividend. The stock has been stagnant ever since.

I dont get how some peopleeven longtime investorsthink dividends are free money.
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post #20 of 56
12/4/09 at 3:08pm
Been with Lala for years and I think this could be a thing of beauty! I do wonder how the trading of the CD's will be effected if at all. That's a major money saver over buying a CD or the album on iTunes and the best reason to be on Lala. Anyone else been with Lala???
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post #21 of 56
12/4/09 at 3:16pm
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Originally Posted by anantksundaram View Post

For Apple to succumb to that pressure would be dumb, and that, they are not. Perhaps a one-time 'special' dividend, or a massive share repurchase would be OK, but to initiate a regular dividend payout could have disastrous signaling consequences.

Exactly. The whole concept of a dividend is stupid and just creates a drag on the companies finances.

I think Apple is just taking a stand here, as they do on a lot of things and saying that they don't believe in dividends, period. They just suck capital out of the company for no good reason. Sort of like executive bonuses.

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post #22 of 56
12/4/09 at 3:21pm
Quote:
Originally Posted by Sevenfeet View Post

An acquisition by Apple like this is interesting. From a technological standpoint, I doubt LaLa has anything Apple couldn't build on their own. But the music industry might be preventing Apple from signing new streaming contracts, so Apple might be end-running them to buy someone who has those long-term deals already sewn up.

This could be true, but the deals Lala has in place are kind of useless in that they are for the USA only.

For the purchase to be useful to Apple, they would have to go international with it almost immediately given their global focus now, and those international contracts would presumably be just as hard to negotiate as they would without Lala. I would also think that given their relationship to the music business in the USA, that they could negotiate streaming contracts for the USA (a la Lala), fairly easily.

Maybe they are just buying the installed customer base, or the "legal CD sharing" part of the contracts?

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post #23 of 56
12/4/09 at 3:24pm
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Originally Posted by Gazoobee View Post

Exactly. The whole concept of a dividend is stupid and just creates a drag on the companies finances.

I think Apple is just taking a stand here, as they do on a lot of things and saying that they don't believe in dividends, period. They just suck capital out of the company for no good reason. Sort of like executive bonuses.

I view dividends like I view coupons. Once you start doing it people expect it. I dont care for either.
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post #24 of 56
12/4/09 at 3:41pm
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Originally Posted by solipsism View Post

I view dividends like I view coupons. Once you start doing it people expect it. I dont care for either.

I think you're probably right. Even a one off "special" dividend sets precedence.

If they want to give money back to shareholders (and I think at some point, they may have to, given $31bn is a hell of a pile and they continue to add to it), I think share re-purchase is a better method.
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post #25 of 56
12/4/09 at 3:47pm
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Originally Posted by PaulMJohnson View Post

I think you're probably right. Even a one off "special" dividend sets precedence.

If they want to give money back to shareholders (and I think at some point, they may have to, given $31bn is a hell of a pile and they continue to add to it), I think share re-purchase is a better method.

When you really need to skim some fat off the top like MS did, sure, but look at MS now. I dont think $31B is excessive for a company worth 5-5x that much and that could easily spend a billion next year as an advance payment to a company for a single component.
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post #26 of 56
12/4/09 at 3:49pm
Quote:
Originally Posted by solipsism View Post

When you really need to skim some fat off the top like MS did, sure, but look at MS now. I dont think $31B is excessive for a company worth 5-5x that much and that could easily spend a billion next year as an advance payment to a company for a single component.

Whilst I don't disagree with you, the thing is, it's the fund managers on Wall Street that matter. The bulk of this money in effect belongs to them, and it becomes a question of whether or not they think they can get better returns with the cash than Apple can.
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post #27 of 56
12/4/09 at 3:58pm
After reading the description of Lala's service "... customers can listen to an entire song once for free ...", it seems like this would be a no brainer addition to the "iTunes Preview" site they just put up. It would be even nicer if being a .Mac member would give you the same access.

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post #28 of 56
12/4/09 at 4:14pm
Quote:
Originally Posted by Gazoobee View Post

This could be true, but the deals Lala has in place are kind of useless in that they are for the USA only.

For the purchase to be useful to Apple, they would have to go international with it almost immediately given their global focus now, and those international contracts would presumably be just as hard to negotiate as they would without Lala. I would also think that given their relationship to the music business in the USA, that they could negotiate streaming contracts for the USA (a la Lala), fairly easily.

Maybe they are just buying the installed customer base, or the "legal CD sharing" part of the contracts?

Random viewpoint from a semi-prominent indie in the biz...

Doubtful. Apple already has streaming built into iTunes for the radio stations, podcasts and those 30-second iTunes previews. More likely Apple is buying the talent and the cherry on the sunday is one less, however irrelevant competitor out of business. Based on royalty reporting that I've seen... there are maybe 200 active users on Lala, the most active maybe listening to more than 10 songs a day. They probably inflate their numbers to sound big to the public, but they just aren't streaming much to anyone. But then again neither are any of the other services. Very hard to get advertisers to pay for what consumers are eating, when they aren't eating at the restaurant, they're too busy stealing the food off the truck in the back.

Advertising is increasingly not fulfilling the role it used to, in sponsoring the creation and development of content. Consumers have been corrupted by illegal file sharing and are unwilling to pay for what they consume. The result has been a huge decline in content development. Streaming doesn't work as a mechanism because there's no way to pay any bills with it. If you think otherwise, please let me know, there are a lot of people who would love to start using it to support their art. Most of the noise is from VC sponsored tech startups that make a bunch of noise about their groundbreaking media service, they get a little press and sell to a bigger company, where the product never goes anywhere.

Once this insanity levels out and after some internal industry power shifts, all media will continue to move to an a la carte system. If you want to watch Battlestar Gallactica, you'll buy the episode or the season. If you want Lady Gaga's music, you'll buy a song or buy a series of songs that are released over time. Advertisers will fund the development costs, consumers will pay the labor and to the successful - profit. There's a lot of online bullsh@t from whiners complaining that they couldn't move Coldplay to their friends iPod. The industry result, especially for indie artists since Apple's removal of copy-protection is substantially lower revenue for artists and a new explosion in file trading sites (or as it's classically known - theft).
Apple has little incentive to push a streaming service for music unless they just mirror what XM does with a few preset 'radio stations'. If they could hammer out an agreement with all the major TV networks, maybe they could start a TV subscription service? However I'm going to assume that Apple also knows that train has already left the station too.

If streaming is to be had, the only area they would probably want to go is in movie rentals.
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post #29 of 56
12/4/09 at 4:15pm
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Originally Posted by PaulMJohnson View Post

Whilst I don't disagree with you, the thing is, it's the fund managers on Wall Street that matter. The bulk of this money in effect belongs to them, and it becomes a question of whether or not they think they can get better returns with the cash than Apple can.

Good point.

Quote:
Originally Posted by Gazoobee View Post

After reading the description of Lala's service "... customers can listen to an entire song once for free ...", it seems like this would be a no brainer addition to the "iTunes Preview" site they just put up. It would be even nicer if being a .Mac member would give you the same access.

Interesting. Wasnt there some issue a month or so ago about previewing audio should require royalties to be paid to carriers? How would that fit into this Lala purchase?
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post #30 of 56
12/4/09 at 4:30pm
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Originally Posted by christopher126 View Post

Think how many matte screens you could buy with $31 billion or how many flash units you could buy to help the iPhone camera?

Nice bait on that hook!
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post #31 of 56
12/4/09 at 4:36pm
Quote:
Originally Posted by Sevenfeet View Post

An acquisition by Apple like this is interesting. From a technological standpoint, I doubt LaLa has anything Apple couldn't build on their own. But the music industry might be preventing Apple from signing new streaming contracts, so Apple might be end-running them to buy someone who has those long-term deals already sewn up.

Or they could be purchasing the company for talent.
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post #32 of 56
12/4/09 at 5:13pm
Lala is a great service. I was part of the beta test group (and still use the beta app on my iPhone) and the final app is in the App Store approval process now.
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post #33 of 56
12/4/09 at 5:27pm
Quote:
Originally Posted by universeman View Post

Seriously, $31b is an embarrassing amount of cash for a company Apple's size, with no debt and high margins.

The pressure will be on soon for them to start paying a dividend, unless they can prove that they can exercise their balance sheet a bit more and drive higher growth.

It's not that they're not doing wonderfully - they are - but they're making so much profit and just letting it sit in the bank, that at some point they're going to need to return it to the shareholders as a dividend. Unless they've got better ideas of what to do with it.

I hope they have better ideas of what to do with it!

"Seriously"...These people are not stupid. They have their whole next decade planned out. They know exactly what they are doing.
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post #34 of 56
12/4/09 at 5:43pm
This might not be even true, but if it is they might not even do what people think. Could be acquiring patents. No interest in this myself, but I suppose subscription will be a nice option for some. Meh for me. Meh for techstud too.

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post #35 of 56
12/4/09 at 6:16pm
Quote:
Originally Posted by oxygenhose View Post

Random viewpoint from a semi-prominent indie in the biz...

Doubtful. Apple already has streaming built into iTunes for the radio stations, podcasts and those 30-second iTunes previews. More likely Apple is buying the talent and the cherry on the sunday is one less, however irrelevant competitor out of business. Based on royalty reporting that I've seen... there are maybe 200 active users on Lala, the most active maybe listening to more than 10 songs a day. They probably inflate their numbers to sound big to the public, but they just aren't streaming much to anyone. But then again neither are any of the other services. Very hard to get advertisers to pay for what consumers are eating, when they aren't eating at the restaurant, they're too busy stealing the food off the truck in the back.

Advertising is increasingly not fulfilling the role it used to, in sponsoring the creation and development of content. Consumers have been corrupted by illegal file sharing and are unwilling to pay for what they consume. The result has been a huge decline in content development. Streaming doesn't work as a mechanism because there's no way to pay any bills with it. If you think otherwise, please let me know, there are a lot of people who would love to start using it to support their art. Most of the noise is from VC sponsored tech startups that make a bunch of noise about their groundbreaking media service, they get a little press and sell to a bigger company, where the product never goes anywhere.

Once this insanity levels out and after some internal industry power shifts, all media will continue to move to an a la carte system. If you want to watch Battlestar Gallactica, you'll buy the episode or the season. If you want Lady Gaga's music, you'll buy a song or buy a series of songs that are released over time. Advertisers will fund the development costs, consumers will pay the labor and to the successful - profit. There's a lot of online bullsh@t from whiners complaining that they couldn't move Coldplay to their friends iPod. The industry result, especially for indie artists since Apple's removal of copy-protection is substantially lower revenue for artists and a new explosion in file trading sites (or as it's classically known - theft).
Apple has little incentive to push a streaming service for music unless they just mirror what XM does with a few preset 'radio stations'. If they could hammer out an agreement with all the major TV networks, maybe they could start a TV subscription service? However I'm going to assume that Apple also knows that train has already left the station too.

If streaming is to be had, the only area they would probably want to go is in movie rentals.

Lala by the way is not free. After the first 50 songs you have to pay to keep on streaming the ones you want, so it is not completely advertised supported. The problem I have with it is that it doe not stream to my phone. If it did, I might by more songs.
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post #36 of 56
12/4/09 at 6:18pm
Quote:
Originally Posted by STecchino View Post

Lala is a great service. I was part of the beta test group (and still use the beta app on my iPhone) and the final app is in the App Store approval process now.

Are you happy with the app? This is great news.
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post #37 of 56
12/4/09 at 6:24pm
I just checked out Lala and I think it would fit perfectly in as part of me.com. The me.com users can store their media in the cloud and listen or watch it from anywhere: iPhone, iPod, iPad Tablet, PC, Mac... you name it.

Lala has a clean and simple user interface that is quite well design ergonomically. It probably has some very good technology behind for Apple to be interested. Lala probably has an interesting deal with the record labels as well.

Apple is going to be big in cloud computing and Lala would fit in just perfectly at me.com

Time will tell.
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post #38 of 56
12/4/09 at 6:27pm
if Apple can get a streaming service then they can offer iPhones and Touches streaming through the iPod app without having to offer 3rd-party multitasking. If they then charge for a service that is otherwise free from other streaming sources the whining will reach critical mass.

While it is by far the single most touted reason people want multitasking (or at least use as an example) I hope that 3rd-party multitasking does come as the 3GS has enough RAM for an extra app or two.
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post #39 of 56
12/4/09 at 6:35pm
Quote:
Originally Posted by PaulMJohnson View Post

I think you're probably right. Even a one off "special" dividend sets precedence.

If they want to give money back to shareholders (and I think at some point, they may have to, given $31bn is a hell of a pile and they continue to add to it), I think share re-purchase is a better method.

That would have the added benefit of encouraging caution among stock-manipulating short sellers. I would really get a laugh out of the short squeeze that would result from Apple announcing they are buying back about $10 billion in stock.
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post #40 of 56
12/4/09 at 7:04pm
Quote:
Originally Posted by solipsism View Post

I dont get how some peopleeven longtime investorsthink dividends are free money.

Well, it's taxed lower than regular capital gains and you don't have to sell your stock to get it, so it looks free enough to be free to me.

I know it goes against the philosophy of the "Oracle of Omaha" , but I think dividends are especially good for a company this successful if they're not going to do anything with their money.
I have faith jobs knows what he's doing. Instead of dividends, I'd rather see a stock buy back.

How on earth Google keeps such a high stock price I'll never understand... talk about trading on potential. Google could burst in 12 months time and no one would see it coming. At least Apple has real products with an actual supply chain and monitor-able activities.
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