Apple reportedly spent $80 million to acquire Lala
Apple's surprise purchase of music streaming service Lala last week has been given an unconfirmed price tag of about $80 million, placing a premium on the company.
Citing multiple sources, Peter Kafka of MediaMemo reported Monday that Apple's acquisition price was less than half of what investors agreed to pay in 2008. However, it is more than the $35 million the company had raised, meaning some -- but not all -- could see a return on their investment in the company.
However, Warner Music Group reportedly received about half of the $20 million it had put into Lala.
"That?s consistent with the $11 million write-down Warner took on its stake back in March," Kafka said. "But it?s also confusing. Most venture deals include a clause that gives investors the right to get their money back?often with a premium?before anyone else gets paid following a sale. So any price of $35 million or more should have paid back the music label in full."
Apple has not said much on its purchase of Lala, nor has it confirmed the price it paid for the company. Apple spokesman Steve Dowling has told multiple outlets the same line: "Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans."
Lala was apparently able to get a premium price from Apple because the company was said to have about $10 million cash on hand. That put Lala in a position of strength from a negotiation standpoint, as they did not have to sell immediately. The company's employees are expected to have begun reporting to Apple Monday.
If the $80 million price tag is accurate, it's still not a large sum for the company. Apple has more than $30 billion in cash and investments.
Last Friday, reports began to emerge that Apple was close to acquiring Lala. The news proved accurate fairly quickly: only hours later, sources were able to confirm the acquisition.
Lala had reportedly actively sought out Apple after its executives concluded that prospects for turning a profit in the short term were relatively slim.
Lala allows its users to stream any song in its library of 8 million tracks once for free. Unlimited streaming can be purchased for 10 cents per track, and songs can be downloaded for 79 cents.
Apple's interest in Lala remains unknown, though one analyst predicted Monday that the company could be interested in making iTunes a cloud-based service that would allow users to access their purchased content from anywhere via a Web browser. If true, the Lala software could play a part in Apple's $1 billion server farm in North Carolina.
Citing multiple sources, Peter Kafka of MediaMemo reported Monday that Apple's acquisition price was less than half of what investors agreed to pay in 2008. However, it is more than the $35 million the company had raised, meaning some -- but not all -- could see a return on their investment in the company.
However, Warner Music Group reportedly received about half of the $20 million it had put into Lala.
"That?s consistent with the $11 million write-down Warner took on its stake back in March," Kafka said. "But it?s also confusing. Most venture deals include a clause that gives investors the right to get their money back?often with a premium?before anyone else gets paid following a sale. So any price of $35 million or more should have paid back the music label in full."
Apple has not said much on its purchase of Lala, nor has it confirmed the price it paid for the company. Apple spokesman Steve Dowling has told multiple outlets the same line: "Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans."
Lala was apparently able to get a premium price from Apple because the company was said to have about $10 million cash on hand. That put Lala in a position of strength from a negotiation standpoint, as they did not have to sell immediately. The company's employees are expected to have begun reporting to Apple Monday.
If the $80 million price tag is accurate, it's still not a large sum for the company. Apple has more than $30 billion in cash and investments.
Last Friday, reports began to emerge that Apple was close to acquiring Lala. The news proved accurate fairly quickly: only hours later, sources were able to confirm the acquisition.
Lala had reportedly actively sought out Apple after its executives concluded that prospects for turning a profit in the short term were relatively slim.
Lala allows its users to stream any song in its library of 8 million tracks once for free. Unlimited streaming can be purchased for 10 cents per track, and songs can be downloaded for 79 cents.
Apple's interest in Lala remains unknown, though one analyst predicted Monday that the company could be interested in making iTunes a cloud-based service that would allow users to access their purchased content from anywhere via a Web browser. If true, the Lala software could play a part in Apple's $1 billion server farm in North Carolina.
Comments
Seems like there's more here than we know (as always).
It's hard for me to believe that they spent $80 million for some engineers. You could fairly easily lure engineers with the promise of a nice job at Apple and some stock without too much fuss. And since Apple doesn't get any of the licensing agreements Lala had, what else can the company offer? Patents?
Seems like there's more here than we know (as always).
Where did you get this information about licensing? I did not see it in the article--you should provide a link.
The previous AI article on the acquisition stated:
Apple's purchase of Lala was confirmed last week, though the terms of the agreement have not been revealed. The private, Palo Alto, Calif., company has a catalog of over 8 million songs, and allows users to match songs on their PCs to its licensed content, and then play them anywhere on the Web through a browser. DRM-free songs can be downloaded for about 89 cents, while Web-only streams are about 10 cents.
It sounds like Apple will have access to their catalogue
Where did you get this information about licensing? I did not see it in the article--you should provide a link.
The previous AI article on the acquisition stated:
It sounds like Apple will have access to their catalogue
He is right 9to5 reported that none of the agreement are valid now that they held with the music labels.
It's hard for me to believe that they spent $80 million for some engineers. You could fairly easily lure engineers with the promise of a nice job at Apple and some stock without too much fuss. And since Apple doesn't get any of the licensing agreements Lala had, what else can the company offer? Patents?
Seems like there's more here than we know (as always).
You make a strong argument. I now recall reading that Apple has lured away more than a couple Delicious Library coders to the halls of Cupertino. There has to be some IP that is worth having to spend that much on the company.
Where did you get this information about licensing? I did not see it in the article--you should provide a link.
The previous AI article on the acquisition stated:
It sounds like Apple will have access to their catalogue
I?ve read many articles this past weekend stating that Lala?s streaming licenses are not transferable if they are acquired by another company.
Lala has 6M songs licensed in their catalogue and iTunes Store has 8M songs. What would they need an overlapping catalogue for? I agree with dagamer34, there is a huge piece of the puzzle missing.
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Close them down, and stop folks from enjoying FREE music ? that's a good enough reason for Apple.
Skip
One, I'm not sure you can call their model "free". You get to stream the entire song once, then are stuck with 30-second clips unless you pay 10 cents for unlimited online access or 90 cents for a download. Cheaper? Yes, but not free. Also, and I can't confirm this, but I remember reading that their subscriber base was embarrassingly low, especially compared to other streaming music services like napster and rhapsody (which aren't terribly high, either), so I don't think closing down a competitor was motivation either. I agree with the majority of posts on here, that there is more to the story that we don't and probably won't know for a while.
On the other hand, I'm still puzzled what Apple bought Lala for. Seems rather expensive if they're trying to acquire the people, the technology assets don't seem to be that big a deal, existing user base doesn't appear to be all that large, and apparently the music licenses don't transfer (what happens to the music the existing users already paid for?)
I started trying to break down the actual assets Lala had for a reply to the earlier thread, but decided I wasn't that interested in this topic...
Update
TechCrunch is now reporting that Apple bought Lala for $17 million, which makes a whole lot more sense.
Suggesting that Apple intends to make "iTunes anywhere" part of the sales pitch for their devices and services.
I just hope they don't put it behind the Mobile Me pay wall.
I just hope they don't put it behind the Mobile Me pay wall.
I?ve been contemplating that. There are plenty of business arguments I can think of for both cases but I think that ultimately going with something like www.itunes.com, not a paid subscription site, is the best business decision.
I’ve been contemplating that. There are plenty of business arguments I can think of for both cases but I think that ultimately going with something like www.itunes.com, not a paid subscription site, is the best business decision.
Is that web iTunes still active? Your link goes to the iTunes info site at Apple.com.
But I had forgotten about that web version altogether, and remember wondering what it was for when I saw it. As I recall you really couldn't do anything other than browse titles, and trying to do anything beyond that just sent you to iTunes proper.
Hmmmm........ not sure how, but suddenly it seems very interesting. A placeholder for a new service? And it appears Apple has redirected the URL.
Is that web iTunes still active? Your link goes to the iTunes info site at Apple.com.
But I had forgotten about that web version altogether, and remember wondering what it was for when I saw it. As I recall you really couldn't do anything other than browse titles, and trying to do anything beyond that just sent you to iTunes proper.
Hmmmm........ not sure how, but suddenly it seems very interesting. A placeholder for a new service? And it appears Apple has redirected the URL.
iTunes Preview is still active and it’s using itunes.apple.com for the third and second level domains. Going live with itunes.com seems the most logical to me from a business standpoint.The iTunes Preview announcement last month and then the Lala buyout this month, coupled with iTunes Store music having no DRM which it can play on anything with an AAC codec and Chrome OS’ only option to support iTunes—even offline—is through a browser-based setup tells me this isn’t just a passing fancy fro Apple but something they are very much inclinded to deliver in order to maintain their dominance.
The iTunes Preview announcement last month and then the Lala buyout this month, coupled with iTunes Store music having no DRM which it can play on anything with an AAC codec and Chrome OS? only option to support iTunes?even offline?is through a browser-based setup tells me this isn?t just a passing fancy fro Apple but something they are very much inclinded to deliver in order to maintain their dominance.
Agree completely. Apple definitely has plans for/with LaLa beyond simply buying out a small outfit. I see no other reason for Apple's move than it being strategic and part of a wider plan to improve iTiunes. LaLa persented no threat in terms of competition, was struggling financially, but was still doing some interesting things. Unless of course Apple's move was to prevent/preempt a similar move by Google.
Agree completely. Apple definitely has plans for/with LaLa beyond simply buying out a small outfit. I see no other reason for Apple's move than it being strategic and part of a wider plan to improve iTiunes. LaLa persented no threat in terms of competition, was struggling financially, but was still doing some interesting things. Unless of course Apple's move was to prevent/preempt a similar move by Google.
I have to expect Amazon to now be working on a way to buy and host music online using a completely web-based interface and library that is suitable for Chrome OS and phones with robust web-browsers so that they don’t have to make different apps for different OSes. The best chance for Apple is to make the iTunes Store music completely accessible though a web-interface, not an individual store for each and every mobile OS platform out there. This means that is has to sell it, host it and sync with your main PCs music library, if you have one. Hell, Linux may finally be able to use iTunes in the coming months.
The more I think about it the more I see that this is the only possibility and Apple has the biggest opportunity, the biggest anchor to keep their store growing. But they also have the biggest crutch if they can’t see that it also needs to be completely independent of the current, stand-alone iTunes program at some level.
The iTunes Preview is more odd to me that the Lala buyout because it ultimately does nothing. You still have to use the iTunes program to access the iTunes Store to purchase the music. It also doesn’t connect to anything but music, not even audiobooks, so it’s a very limited preview site. It’s really very un-Apple-like to release something that looks and feels incomplete.
I find that it’s considerably faster than using the iTS for quickly finding things though link clicking, but there is no search field, which is what I mostly use. I want a find-as-you-type system. Hopefully this is one of the things Lala can bring to the table.
My guess is that LaLa has patents on their cloud mirroring tech-- the way they scan your drive for songs you already have and make those available as streamable.
Suggesting that Apple intends to make "iTunes anywhere" part of the sales pitch for their devices and services.
This is likely what's going to happen. I am just guessing here but it would make a lot of sense if they use it to give people streaming access to their iTunes purchased music and maybe small charge to access non iTunes purchased music.
pros of Lala/Apple cloud streaming:
1. 10 cents for lifetime (or as long as Apple exists) listening rights to a song - just 10% or less of the cost of an iTunes purchase. your library could be 10x bigger for the same total expenditure!
2. one free full preview of a song (the iTunes random 30 seconds is almost never enuff).
3. play anywhere you have web access (and iPhone cell data too?).
4. don't need a big storage drive.
cons of Lala/Apple cloud streaming:
5. can't play the song when no web (or iPhone?) access is available. whereas if you buy it from iTunes you can.
6. can't burn a CD with the songs. if you buy it from iTunes you can.
7. can't use songs as ringtones, imovie soundtracks, etc. if you buy it from iTunes you can.
8. streaming audio quality not always as good as iTunes purchase quality.
9. streaming may conflict with other simultaneous LAN activity, causing audio glitches.
of course you could just buy a few songs you want to burn etc. and stream the rest, and save a lot of money.
what i don't get is why the media companies would like this. they just pushed the price of hit songs on iTunes up to $1.39 this year, and higher prices for albums too. how could they make anywhere near as much money at 10 cents a song? teens aren't going to buy 14x as many pop star songs.
it would only maybe make sense if you paid 10 cents for each piece of hardware licensed to stream one song. so then you might pay 30 cents total per song (for a desktop, laptop, iPod combo) - or 50 cents for all 5 computers licensed to one iTunes account? then yes you might buy 3x as much stuff.
but whatever the pricing arrangement the mediacos demand, the suggestion Apple is looking to pre-empt a similar Google service makes a lot of sense. Apple needs to defend iTunes broad popularity at all costs, it's the heart of its cross-platform ecosystem. so it can't let Google outflank it with a service like this that Apple can't match.