How Apple Killed an iTunes Competitor

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.'"

Re:Actually a competitor sold out ...

[Anonymous Coward]

Oh, come on, please - that's intellectual dishonesty.

Yes, apple paid for it, but they certainly killed lala, and it was certainly part of the contract. They didn't want Google to get that power, and they didn't want an iTunes competitor. Trying to wrap this in a "free market" huggy-blanket is not just naive, it's dishonest.

Re:Actually a competitor sold out ...

[wickerprints]

Indeed. It sounds to me like the lesson to be learned here is that you don't throw out lowball offers when you have an opportunity to disrupt the market. Google made a miscalculation. Spend generously when you need to, in order to reap greater value down the line.

Now, whether that is ultimately important in light of Android's undisputed success and Apple's seeming disinterest in continuing to innovate with iOS, is another story. iOS has basically stagnated, and that's coming from someone who has stayed with Apple since the original iPhone. I've never purchased an Android device and even I can tell that it is a more flexible and capable platform.

Lala was better than iTunes.

[theedgeofoblivious]

I remember using Lala, mostly at work. At the time it was much nicer to use than iTunes and Pandora.

I remember the day when I found out that Apple was shutting down Lala, and I was very disappointed, because Apple is very insistent that people only use technology in the way that Apple wants them to. I do generally like Apple's interface design, but Apple is very insistent that its way is the best, and they have been insistent even in the cases that they've been wrong.

Lala had then what Amazon, Google, and Apple have only recently added, which is the ability to basically mirror your library from their website, and when Apple bought the service it was a big loss. I think Google or Amazon would have actually built on the service, but Apple just killed it, and that sucked.

Re:and they paved the way for spotify

[idobi]

This isn't even a fair comparison. For every track sold on iTunes, the "label" (by label, it could apply to an actual label, or the artist themselves if they self published) gets $.70. For every track played on spotify, the "label" gets $.0017. Buying through iTunes is vastly more beneficial to content producers.

Re:and they paved the way for spotify

[alvinrod]

Regardless if which you buy, the actual artist gets next to nothing. The indie labels probably have a better deal, but there are still a lot of artists that aren't on iTunes. Maybe things have changed more recently, but there was a time where you couldn't find anything that wasn't from a major label through them and it's been pretty well established how badly they screw over the artists. They might not be getting paid either way given the usual studio accounting practices and all of that 'expensive studio time' and other costs that went into making the album.

So the point still stands. For a lot of bands or artists, if you actually want them to see any money you're far better off going to a show or buying some merchandise. Otherwise it's not exactly easy to tell if someone is signed to a label that isn't completely shafting them.

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