In an effort to expand its iTunes music for web streaming and increase its music sell through streamed via the internet, Apple Inc. (AAPL) acquired the online music streaming company Lala.com. However, details and pricing of the deal were not disclosed. Lala’s web site has 8 million songs available for streaming and purchase.
The company lets users either buy or download a song for between 79 and 89 cents, or pay 10 cents for the rights to stream that song for an unlimited number of times from the Web. Users can listen to the full song before purchase. This acquisition would enable Apple to let users buy or synchronize their music to computers and mobile devices.
Also, users would be able to benefit from the Cloud storage services which would allow them access to their music anywhere from the web. Moreover, users would not have to download the music every time they buy and could skip to the next song. This would definitely save time and enhance user experience. It would also increase user traffic to the site.
Songs on iTunes are available for any one of three prices – 69 cents, 99 cents or $1.29. This deal could add a new payment structure to apple’s strategy and would help listeners choose songs after making informed decisions. Lala is a private company based in Palo Alto, California and is a $35 million joint venture between Bain Capital LLC, Ignition Partners and Warner Music Group Corp.
Lala has also made an agreement with Facebook to offer music through the social networking site and allow its users to gift digital songs for just 10 cents in the MP3 format. Lala recently entered into an agreement with Google Inc. (GOOG). Under the agreement the latter directed users looking for songs to Lala’s site.
The 2003 launch of iTunes helped Apple propel itself in the world of music and establish a name. Apple’s launch of the iTunes Wi-Fi Music Store offered users the ability to browse, search, preview, purchase, and download songs and albums from the iTunes Music Store over a Wi-Fi network directly onto their iPod touch or iPhone and no computer was required for the purpose.
iTunes currently enjoys over a 70% share of the U.S. market for legally purchased and downloaded online music. The iTunes store offers more than 11 million songs. This deal with Lala will help Apple compete against News Corp. (NWS), MySpace Music and Spotify who are streaming new services to capture market share. We maintain our Outperform rating on Apple.
Read the full analyst report on “AAPL”
Read the full analyst report on “GOOG”
Read the full analyst report on “NWS”
Zacks Investment Research
