Confirmed: Apple Buys Music Service Lala, at a Fire Sale Price [UPDATE]
Note: Sources now tell me that Apple ended up paying much more than I had thought for LaLa — around $80 million. That means that some investors could indeed get a return on their investment, thought not all of them will. You can read a full update here, but I’m leaving the rest of this report as is for the time being.
Apple has purchased online music service Lala, I’ve confirmed with a source familiar with the transaction. Both Bloomberg and CNET reported the chats earlier today. If you’d like other confirmation, New York Times also reports that the deal has closed.
Lala’s investors will not get a return on the $35 million they’ve put into the company. Earlier this year, founder Bill Nguyen told me he was working on a deal to get the company more funding in an “up round”–that is, at a higher value than the previous round.
But Warner Music Group (WMG), which had previously invested $20 million in Lala, wrote down $11 million of that. And a source tells me that the Apple transaction reflected a similar discount, meaning that investors will be lucky to get 50 cents on the dollar on this one.
UPDATE: A second source close to the company insists my estimate is “way off” but won’t offer up other details.
What’s unclear is exactly what Apple has bought. Lala offers listeners a streaming music service with one free play and access to replays–not downloads–for 10 cents a track. But while the service recently got a boost via Google’s (GOOG) new music search offering, where it’s one of two featured partners, it doesn’t have a huge customer base to sell, which means Apple (AAPL) could be interested in acquiring its technology and/or team.
The deal is the third acquisition of an online music service in recent months. News Corp.’s (NWS) MySpace has already picked up iLike and Imeem at fire-sale prices.
I’ve put in requests for comment to both Apple and Lala.
Comments
Seems to me Apple is buying LaLa mainly to get rid of a potential iTunes competitor. LaLa is cheaper, integrates with existing iTunes libraries, and is launching an iPhone app that might aggressively compete with other providers' models, like Pandora. 10¢ a tune is a lot cheaper than iTunes and storing a music library in the cloud means you're not limited to (or using up) precious space on your device.
It is very sad that promising start-ups like LaLa and Seeqpod are wiped out in infancy by the biggest corporations trying to protect themselves from emerging competition.
Posted by lilies at December 4th, 2009 at 11:23 pmIt could be that Apple is buying LaLa to stop them from competing with iTunes. LaLa is cheaper, integrates with iTunes libraries, and stores your music and playlists in the cloud freeing up precious space on your device. It's often been called a potential iTunes-killer. Apple may also feel threatened by the LaLa iPhone app that's in beta-testing, which has the potential to redefine how people listen to music on smaller devices (especially if LaLa's app allows caching for off-line playback).
I think it's sad that promising new companies like LaLa and the now defunct Seeqpod are squashed in infancy by large corporations trying to protect themselves, thereby stifling and stalling appealing new technologies and business approaches.
Posted by lilies at December 4th, 2009 at 11:34 pmI've confirmed that the parties are in talks. Hate to lose a reader but trust you to make the right call.
Posted by PKafka at December 5th, 2009 at 1:31 amSuspect these are leaks intended to drive up the price. As it's awfully suspicious several sites heard from the same two (unnamed) sources. And talks “confirmed” is kinda ridiculous anyway. Most companies talk with all sorts of folks all the time on all sorts of topics. Let us know when the ink is dry on something.
Posted by Dave Zatz at December 5th, 2009 at 1:35 amThat's nonsensical: If Apple wanted to sell streamed music for 10 cents a song it could easily do so. Apple's download pricing ranges from 69 cents to $1.29, while Lala says “most” of its downloads cost 89 cents. That sounds comparable to me.
Posted by PKafka at December 5th, 2009 at 1:40 amYes, we're all dupes! But you, sir, are very clever for figuring out that every news organization who has reported on this is talking to the same two sources.
Posted by PKafka at December 5th, 2009 at 1:42 amYes, you are indeed part of a news organization but does an anonymously reported bit with no details really qualify as “news?” But lob as many clever retorts as you'd like, and just ignore us readers who prefer citations and done deals over speculation and rumor.
Posted by Dave Zatz at December 5th, 2009 at 1:51 amMore details for you now. But if you'd prefer for Apple to issue a press release, this may take a while.
Posted by PKafka at December 5th, 2009 at 2:15 amWell, I guess this conversation is moot at this point given the re-writing of your headline and post, plus NYTimes corroboration. (For readers late to the commentary, view the URL and then view the headline) Carry on.
Posted by Dave Zatz at December 5th, 2009 at 2:16 amTo be clear: I've rewritten the headline because the story has progressed since I first reported on it. Earlier today the deal wasn't done, which is what I wrote. Now it is, which is what I've written.
Posted by PKafka at December 5th, 2009 at 2:22 amYep, I understand the updates. Was providing context for folks who stumble onto this conversation and don't understand my gripe. My last four employers were all acquired. They were all in talks with multiple suitors (which I can confirm;) – my point was unless there's a deal or the sources reveal themselves, it's not much of a story. Now that this is reported as a closed deal, my argument is no longer applicable and we can get on with our weekends. ;)
Posted by Dave Zatz at December 5th, 2009 at 2:36 amVery interesting deal, perhaps just because of Apple's stranglehold, keep us updated Peter. No return to investors would be pretty surprising.
Posted by jonathanmarcus at December 5th, 2009 at 3:58 amThese speculation about the valuation are completely bogus. The price is much higher than what is reported here and the investors will make some money… not much though. Apple is really buying Lala to cut another competitive branch and prevent others from buying it first – there is not much technology to transfer here (that you can't get at much lower price).
Posted by mickeymouse2001 at December 5th, 2009 at 4:29 amI'm shocked at the confirmations. But I'm sticking to my word and will continue reading.
Posted by ericnoel at December 6th, 2009 at 11:27 pmlala's model was not sustainable. I doubt the reason for the purchase was “protection”.
Posted by ericnoel at December 6th, 2009 at 11:30 pmwhy are you shocked at the confirmations? this is a sensible acquisition for apple.
Posted by jengroff at December 7th, 2009 at 2:43 pmwhats so wrong with 80M$? maybe the problem is that lala spent 80+M$ on getting where they are today, changing biz models…
but still this marks a very important milestone for online streaming services and the fact the Apple decided to get into this field.
disclosure : I am the CEO of a company called Jukata that provides internet and mobile music services.
Posted by eyalfishler at December 8th, 2009 at 6:42 pmPart of a string of digital music fire-sales last year. What happened? http://bit.ly/b0Fo5C
Posted by morefromalan at February 19th, 2010 at 2:25 am