Apple sets sight on music streaming from the cloud
Apple Inc., the company that restructured the music industry around its iTunes service, is exploring an overhaul of the way it sells and stores music that is aimed at extending its influence to the Web.
The key vehicle for the move is Apple’s newly acquired music-streaming service La La Media Inc. for which Apple paid $85 million. As part of the move, Lala executives have been given key positions helping shape music strategy for the iTunes Store.
Where Apple’s iTunes requires users to download music onto a specific computer, Lala.com lets users buy and listen to music through a Web browser, meaning its customers can access purchases from anywhere, as long as they are connected to the Internet. Apple is considering adopting that same model for songs sold on iTunes, a change that would give consumers more ways to access and manage their iTunes purchases—and wouldn’t require them to download Apple’s software or their purchases. This new business model extends Apple’s grip on the music business, giving it the ability to sell music through search engines and other Web sites and broaden its reach beyond people who come to its virtual store. For consumers, such changes could make it far easier to manage and access large libraries of music, which need to be stored, maintained and backed up on computer hard drives and portable devices.
Record company executives said that they are optimistic about the prospect of consumers being able to buy music from more Web sites, but cautious about any development that would add to Apple’s already significant power. Apple, surpassed Wal-Mart Stores Inc. last year as the biggest music seller, and will generate about $2 billion in iTunes revenue this year, estimates Piper Jaffray & Co. That’s about 20% higher than last year, the brokerage firm estimates, but growth has slowed over the past several years as most people now own iPods or iPhones and it is adding fewer new users.ITunes is also facing pressure from competing services that allow users to listen to “streaming” music either cheaply or free on computers or portable, Internet-connected devices like the iPhone or iPod touch. Streaming has been at the heart of Lala’s strategy for the past two years, in the form of what the site calls “Web songs,” which cost 10 cents and are accessed via a Web browser.
The proposed changes would represent a fundamental redefinition of what it means to own a song, movie or other piece of media—shifting the emphasis from possession of a physical disc or digital file to the right to access content.Certain legal issues remain hazy: If music becomes a virtual product, it isn’t clear how Apple might be able to guarantee a buyer would retain access to a song in perpetuity if, for instance, a new owner gained control of a record label’s catalog and changed the terms of its deal with the retailer.
Lala has partnerships that allow it to sell songs from links embedded on sites as major as Google Inc. and as specialized as the indie-music site Pitchfork Media. Adopting that strategy would represent a major departure for Apple, which has always relied on what is known as a walled-garden approach in which its machines run on proprietary software. But that closed-system approach has limited its sales reach to people who deliberately log in to its online store.
Apple has revisited its iTunes strategy from time to time and had discussed the impact of streaming music services like Lala and Pandora Inc. in the past, but it believed that people want to own their music on hardware. This is the first time, Apple has set its sights on streaming music from the cloud.
The shift could reopen an uncomfortable topic between Apple and the music industry. Record-label executives were relieved in 2003 when Apple launched what was then called the iTunes Music Store, which appeared to be a virtual lifeline in a growing sea of illegally downloaded songs. But they have since also become frustrated that the service’s dominance of the market has made it into a gatekeeper with what they view as undue sway. In addition to selling music, Lala’s software also scans a user’s existing music library and matches its contents with songs on its own servers, then gives the user access to that music via a Web browser. That approach, known in technology circles as cloud computing, could also be part of a revamped, Web-based iTunes, according to the people with knowledge of the talks.It is also possible that Apple would use Lala’s streaming technology as the basis for a subscription service, for which users would pay a flat rate in exchange for unlimited access to music. Such offerings already exist but have never gained much traction with users, mainly because most don’t work with iPods or iPhones.
Heres a YouTube video of the Lala music streaming on the iPhone