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How Apple Killed an iTunes Competitor 143

Posted by Soulskill
from the boom-iHeadshot dept.
An anonymous reader writes "Ed Bott recounts the story of Lala.com, an innovative online music service that reached the top of Google search rankings for consumers seeking music. Their prices were frequently better than the prices on iTunes, and they partnered with Google for the search giant's Music Beta. Lala's founder, Bill Nguyen, decided the time was ripe to sell, entertaining offers from both Google and Nokia. Unfortunately, Nokia's offer was poor, and Google tried to lowball Nguyen. Apple, however, was not so foolish. Correctly identifying a threat to its growing music empire, Steve Jobs offered $80 million for the company, and Nguyen accepted. 'The ultimate irony in this story is that quite a few notable members of the Lala-to-Apple team followed Bill through the door and onward to his next venture. They left millions in options at a the $196.48 exercise price they had from the 2009 sale/retention bonuses. Some of those same engineers returned to Apple in the highly covered [Color Labs acquisition] rumor that 20+ engineers went to Apple for $7M. Apple obtained the same employees for pennies on the dollar. This time with even more experience and startup life under their belt. Paying twice was genius.'"
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How Apple Killed an iTunes Competitor

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  • by perpenso (1613749) on Saturday January 19, 2013 @09:27PM (#42636467)
    Apple didn't kill a competitor, a competitor simply sold out, taking $80M and abandoning their creation to others. They apparently made no provisions in the contract with Apple to continue the service and protect existing Lala customers. They could have required that these existing customers continue to be provided the Lala service for a reasonable timeframe but apparently they did not. Apple was free to shut it down in what looks like 5 months.

    It seems biased to blame it all on Apple.
  • by Anonymous Coward on Saturday January 19, 2013 @09:38PM (#42636509)
    Are you sure you read the article? LaLa approached Apple and asked to be purchased.
  • Re:And yet.... (Score:2, Informative)

    by alen (225700) on Saturday January 19, 2013 @09:47PM (#42636535)

    wasn't amazon selling non-drm music for years before apple?

    and then apple had the nerve to charge you $.30 per song to undrm it?

  • by SuperKendall (25149) on Saturday January 19, 2013 @10:04PM (#42636609)

    wasn't amazon selling non-drm music for years before apple?

    About a year.

    It was the music companies last ditch attempt to break free from Apple.

    It failed so finally music companies allowed Apple to sell DRM free music (which was never under Apple's control, it was up to the labels which is why Amazon got to do so a year earlier).

  • by DogDude (805747) on Saturday January 19, 2013 @10:20PM (#42636651) Homepage
    That DID happen. For a few months, you could search for any song, and Google would display the song with "play" button at the top of the search results that played the entire song. It worked flawlessly.
  • by pushing-robot (1037830) on Saturday January 19, 2013 @11:17PM (#42636875)

    I used Lala quite a bit, and in all honesty, I didn't expect it to stick around even before Apple bought the company. You could preview an entire track for free, then pay ten cents for unlimited listens with no ads and no subscription fees. With payment processing fees, servers, storage, and bandwidth, I doubt Lala was making anything, much less paying the record companies. Heck, you would have had to buy six hundred songs a year just to match Spotify's cheapest subscription. Twelve or eighteen hundred to match Zune or Rhapsody. Oh, and did I mention Lala would even scan your existing music library and then let you stream all your songs from their servers for free? Yeah, that's a sustainable business model.

    I'm sure Lala was nothing but acquision-bait, like Youtube and Instagram. Offer a good service for way below cost, get a huge following, find somebody with deep pockets to buy your "community" and retire to a tropical island.

  • Re:And yet.... (Score:3, Informative)

    by milkmage (795746) on Sunday January 20, 2013 @12:26AM (#42637083)

    amazon DRM free first? impossible. they didn't even have a music store yet.

    http://arstechnica.com/uncategorized/2007/06/emi-says-drm-free-music-is-selling-well/ [arstechnica.com]
    Although the iTunes Store was the first online store through which EMI sold its DRM-free tracks, Amazon recently said that it will also be selling DRM-free EMI songs through its newly-announced music store later this year

    "apple had the nerve to charge"
    no. "price increases by the record labels, which were made possible by Apple's capitulation."
    http://news.cnet.com/amazon-follows-apple-to-$1.29/ [cnet.com] ...so apple made DRM go away in exchange for higher prices. you think amazon raised prices because apple did? or you think amazon raised prices because the lables told them to? makes no sense to RAISE your prices to match the competition unless the IP owners set the terms (for DRM free). makse more sense to me to keep the price LOWER (you know, to attract more customers) - than to raise them

  • by virb67 (1771270) on Sunday January 20, 2013 @12:48AM (#42637195)
    WOXY was the single best radio station I've ever come across to discover great up-and-coming new indie bands. It was a longtime terrestrial radio station that operated out of Cincinnati. When you watch dustin Hoffman annoying the shit of Tom Cruise by incessantly repeating "97X, BAM! the futurrrre of rock-n-roll", he's repeating WOXY's tagline. The station switched over to an internet-based ad-free model in the early 2000s and got into financial trouble. Lala became the station's patron savior, financially keeping the station alive, hoping to parlay its relationship with the station into indie credibility and an instant customer base. It worked too well. When Apple bought Lala there were many that hoped the company would continue to support the station, but alas, Woxy shut down almost immediately after the purchase and has been dead ever since. RIP WOXY.
  • by mysidia (191772) on Sunday January 20, 2013 @03:34AM (#42637715)

    For every track played on spotify, the "label" gets $.0017. Buying through iTunes is vastly more beneficial to content producers.

    OK... but what happens when the track is in your playlist, and you listen to it every day on a subscription service, for 2 years (assume about once a day); in other words 365 x 2 = 730 times spread out over 2 years?

    OK, discounted ~5%/Year = 0.0137%/Day , the present value of that stream of revenue for the label would be:
    ( $0.0017 / 0.000137)*(1-1/(1+0.000137)^730) = $1.18

    And despite them having gotten $1.24 from you worth $1.18 today..... you still don't own the sound track. You have to continue the subscription, if you want to keep hearing it :)

    So... the question becomes... what happens, if you keep listening to the track once a day one third of the days of the rest of your life? Assuming you are age 30, and live until age 70, that's 4870 listens, or $0.017 * 4870 = $82.79

    Which is worth approximately ( $0.0017 / 3 / 0.0000102669)*(1-1/(1+0.0000102669)^4870) = $2.69

    In today's dollars, and $2.69 is a heck of a lot more money for the label than $0.70, hell, it's over 3 times as much.

    For you to subscribe to the service, and listen to your music through that, as long as they get their little .17 cents every time :)

  • Re:And yet.... (Score:4, Informative)

    by beelsebob (529313) on Sunday January 20, 2013 @07:15AM (#42638231)

    wasn't amazon selling non-drm music for years before apple?

    No, Apple were first with EMI. The rest of the big 4 held back from apple, so amazon were the first to have all their catalog unlocked.

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