iTunes App Trick

Apple is in the final stages of cutting a deal to acquire streaming music site Lala.com, according to a report by CNET’s Greg Sandoval. There are few details about the reported acquisition but sources told Sandoval that the terms have already been hammered out and the only thing left to do is sign a final agreement.  (Techmeme)

It would mark the third acquisition of a digital music site in recent months, with MySpace acquiring iLike in August and Imeem last month.

It’s unclear what Apple would do with a service like Lala – and neither company is even confirming the deal yet – but, given Apple’s presence in the digital music space and the rise of Web-connected mobile device such as the iPhone, it seems that Apple’s interest in Lala would be to bring an online streaming music experience to iTunes users.

Lala, which was once a CD-swapping service, has changed its business model a couple of times in recent years. Today, Lala allows users to listen to a full version of a song as a preview (as opposed to Apple’s 30-second preview clip) and then pay 10 cents for it for unlimited playback of the song over the Internet. If users want to actually purchase a DRM-free version of the song, it can be downloaded and stored on a hard drive, as well as a portable device such as the iPod or Zune, for an additional 79 cents. (That’s 89 cents in total when you add in the initial 10 cents.)

I would guess that Apple would incorporate the technology into iTunes, maybe offering a free full-track preview and a low-cost version that allows for online streaming only. Eventually, Apple would want to sell you that full-priced track for playback on an iPod or iPhone.

There’s also something to be said about storing music libraries in the cloud. Currently, music tracks purchased through iTunes are downloaded and stored on the purchaser’s physical hard drive. But hard drives can fail and when that happens, huge investments in music purchases can disappear in a moment. This has happened to me before and it cost me a couple of hundred bucks to have my music library restored. Even then, some tracks couldn’t be recovered and the metadata on many that were recovered was lost forever.

Of course, I’m just speculating about Apple might do with the Lala service. But, knowing Apple and its history, I imagine that the integrating of Lala into iTunes will bring some sort cool new value add to an already popular service.

Apple’s purchase of music streaming service Lala signals a fundamental change in the way that the company will present iTunes content on the web.

Apple is poised to totally change its iTunes business model with a increased focus on Internet-based content, reports the Wall Street Journal in an article appearing in Thursday’s edition. Using newly acquired La La Media Inc. as a springboard, Apple is considering to adopt a usage model that would allow consumers to access and manage their iTunes purchases directly through the Internet without downloading the content in question or the iTunes software.

In its current form, iTunes requires users to download and manage their iTunes purchases on a per-computer basis. With a new focus on Internet-based management, an iTunes user could log into their account and access and stream all their music from any computer with an Internet connection. This technology could also allow Apple to sell music on other websites or even in web-based search results.

Apple has already made some small strides into web-based iTunes functionality with the release of iTunes Preview in November. With iTunes Preview, users can share music links via iTunes without the need to launch Apple’s media suite. Previously, users without iTunes were prompted to install the software in order to view content.

The Wall Street Journal’s figure of $85 million for Lala’s purchase price is in the same ballpark of what Peter Kafka at AllThingsDigital reported Monday. The report also confirms what Maynard Um predicted about Apple’s reasons for aquiring Lala earlier this week.

Lala execs have already assumed important roles in shaping Apple’s iTunes strategy going forward. “It’s our understanding that the Lala guys are going to be in very significant roles,” someone familiar with Apple’s plans reportedly said.

Apple’s $1 billion server farm project planned for North Carolina may actually be tied to this web-based strategy, and could provide the backbone for a web-based iTunes.

According to the Journal, Apple could begin to make these changes as early as next year.

iPhone game maker Tapulous now earns nearly $1 million per month in sales from the App Store. It’s just another example of the store’s incredible success — which allegedly even caught Apple off guard.

In September, Apple announced that total downloads on the App Store had topped 2 billion. In profiling the success of the App Store, the Financial Times spoke with Matt Murphy, partner with Kleiner Perkins Caufield & Byers, the venture capital firm that created the first investment fund for iPhone developers, worth more than $100 million.

“We had no idea there would be 2 billion downloads by October,” Murphy said. “Most people within Apple, if you had told them it would be a fifth of that by now, they would have been pretty happy.”

The App Store achieved a number of milestones in 2009, including in November when Apple announced that the digital download destination had more than 100,000 applications available. The six-figure accomplishment was achieved less than a year and a half after the App Store debuted.

Earlier this month, Apple promoted a list of the best-selling and best-reviewed iPhone and iPod touch applications of the year in its iTunes Rewind 2009 feature. Among the “Best of 2009″ was Tap Tap Revenge 3, from development studio Tapulous. The $0.99 rhythm game (iTunes link) has more than 20 million downloads, and the developer claims it is the most popular on the platform.

The Tap Tap series has produced a number of artist-specific spinoffs, with top-tier names like Metallica, Dave Matthews Band, Coldplay, Weezer and Lady Gaga. The company found quick success, achieving more than a million downloads in its first three weeks. Through 2009, despite the entrance of big game publishers, the independent studio managed to maintain its success.

Tapulous was profiled by Reuters this weekend, which revealed that its sales have approached $1 million per month. The company, which says it is profitable, has also raised $2.8 million from investors. Chief Executive Bart Decrem said he expects his company to continue to grow as the iPhone and iPod touch platform continues to expand.

“It’s going to be big and all of a sudden people are going to say, ‘Holy cow, where did those guys come from?’” Decrem reportedly said.