Apple to Shut Its Lala Online Music Site This Month in Faceoff With Google

Apple Inc.’s Lala online music service will shut May 31, Lala said on its Web site.

The site is “no longer accepting new users,” it said. Lala, purchased by Apple for $193.3 million in December, lets users listen to one of more than 8 million songs once for free and buy unlimited access for 10 cents each.

Apple likely has several reasons for shutting Lala, said Ashok Kumar, an analyst with Rodman & Renshaw LLC in New York. The company may want to apply Lala’s Internet cloud-based distribution technology to a future version of its iTunes software and media store and it may also want to keep Lala’s technology and staff away from other competitors, namely Google Inc., he said.

“In the face-off between Google and Apple, the next battlefront is going to be around the delivery of cloud services,” Kumar said in a telephone interview. “The technology is fairly valuable.”

The service differs from iTunes, also operated by Apple. Lala’s music is stored on servers and accessed through the Internet. ITunes allows music to be downloaded to a computer.

Lala, based in Palo Alto, California, offers music from EMI Music, Warner Music, Sony BMG Music Entertainment and Universal Music Group and others. If customers decide to download a track, the cost is 79 cents, compared with 69 cents to $1.29 on iTunes.

Apple, maker of the iPhone and the Macintosh computer, offers more than 11 million songs through its iTunes store, which it opened in April 2003 and operates in 23 countries. The Cupertino, California-based company says it is the world’s largest music retailer, with sales of 8.5 billion songs.

Investors in Lala include New York-based Warner Music Group Corp., Boston-based Bain Capital Ventures and Ignition Partners in Bellevue, Washington.

Shares of Apple fell $7.55, or 2.8 percent, to $261.09 yesterday in Nasdaq Stock Market composite trading. The stock has climbed 24 percent so far this year.

To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net; Arik Hesseldahl in New York at ahesseldahl@bloomberg.net.

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