Apple to Close Lala Music Service – Analyst Blog

Apple Inc. (AAPL) is expected to close down its online music streaming company Lala.com, which was acquired in December 2009.

Lala is a joint venture between Bain Capital LLC, Ignition Partners and Warner Music Group Corp and had entered into agreements with Google Inc. (GOOG), Facebook and other large vendors.

The online music service company Lala.com will be closed down on May 31. A notice on Lala’s Web site said that it would issue refunds to users who have already paid for songs and have not downloaded. Moreover, the users could also get iTunes credits. Apple has not provided any comment and future expectations on its shut down of Lala.

Apple acquired Lala to expand its iTunes music for web streaming and increasing its music sell via the Internet. Moreover, the acquisition enabled users to buy or synchronize their music to computers and mobile devices and benefit from the Cloud storage services, which would allow them access to their music anywhere from the web.

Also, users would not have to download the music every time they bought and could skip to the next song. This saved time and enhanced user experience as they could chose songs after making informed decisions. It would have also increased the user traffic to the site. Earlier, Apple had not provided any details and pri cing of the deal.

Apple’s move to shut down Lala music service stirs speculation among both investors and analysts regarding the launch of a new Web-based version of iTunes, under which it will integrate Lala’s “cloud” technology (Web subscription service) into its iTunes Music Store.

According to speculators, Apple will release an Internet-powered version of iTunes that will no longer require the need to download songs. Therefore this can be one of the reasons for Apple to close its Lala music service company, which is likely to be integrated into iTunes.

Apple is up against increased competition from music service providers such as News Corp. (NWS), MySpace Music, Rhapsody and Spotify who have been streaming new Web based services to capture market share by offering users the ability to access their music collection via the Internet.

Recently, Rhapsody music service launched a new version of its iPhone application that allows users to download and save songs for a monthly fee of $10. Songs can be played even without cell phone service and do not require cords and can easily synch with a computer.

Therefore, Apple’s release of cloud music service would help it compete against these players in the mobile device market, as it would allow users to listen and purchase songs on distant computers and enable users to send them directly to their mobile devices, without the need for downloading.

The cloud version of iTunes will help users download songs on the go, much faster with no storage issues. This could be used for other digital entertainment like TV shows and movies and enable customers to listen to songs stored on distant computers.

We believe that Apple’s iTunes currently enjoys over a 70% share of the U.S. market for legally purchased and downloaded online music. The new cloud music offering by Apple is likely to gain wide acceptance among users, which will further increase market share for iTunes.