On Friday, we heard that Apple had decided to buy Lala, a four-year-old Palo Alto company that permits users to stream music directly from the Internet rather than downloading the tunes.
There was lots of speculation over the last couple of days as to what Apple has in mind. Here are the two polar-opposite theories:
- Conspiracy theorists believe Apple purchased Lala because it was a competitor that they plan to put out of business.
- Others among us are convinced that Apple is getting ready to move away from the iTunes store to streaming tunes from a cloud environment.
Let's talk about the differences between Apple and Lala's business models.
Apple uses a traditional proprietary model. Users pay small fees to download music tracks from the iTunes store. The user owns the tunes and maintains them on a device (a PC or iPod or similar Mp3 player).
Lala's model is different. Instead of a proprietary model, it is more of a subscription model. Users don't own the tunes; they pay 10¢ for unlimited use of a tune whenever and wherever they want. They can stream the tune on their computer at work or on their PC at home or on an Mp3 player at the beach. Lala uses a cloud computing environment to store the user's tunes and can even duplicate the user's iPod playlist.
If you are not familiar with a cloud computing environment, go here to read about it on Wikipedia. Essentially, it's a way for companies (or individuals) to move away from large expenditures in hardware and software. Instead of making huge investments in technology, the customer uses another company's hardware and software and only pays for what s/he uses.
The first time I ever heard of a cloud environment was in November, 2006 when I wrote about Amazon's initiative titled EC2 or Elastic Compute Cloud here.
According to Business Week, EC2 "potentially make(s) a profit center out of idle computing capacity needed for [Amazon's] . . . retail operation. Like most computer networks, Amazon's uses as little as 10% of its capacity at any one time just to leave room for occasional spikes." EC2 allows users to use the Amazon infrastructure by renting out that excess computing power, starting at 10¢ an hour for the equivalent of a basic server computer.
Users have to get used to the idea of storing their data on someone else's servers. One of my brothers--a computer programmer--said that the U.S. government has been leasing secure data space from high tech companies for years.
I'm in the process of reading Googled: The End of the World as We Know It by Ken Auletta. He says:
"A 'cloud' of servers could store a consumer's information and hold a suite of software products, including spreadsheets, word processing, and calendars."So we have both Amazon and Google getting into the cloud computing business. It should, therefore, not come as a surprise when I tell you that, in June, Data Center Knowledge reported that North Carolina Governor Bev Perdue had announced "Apple Inc. has selected North Carolina as the location for a new data center and will invest more than $1 billion in the project over nine years."
"Google has dozens of data centers all over the world . . . and within these data centers are housed what may be the world's most massive computer system, millions of PCs that have no keyboards or screens and are arranged in stacks and have been repurposed as servers to process searches. The servers in these data centers provide an array of software services that users can access from any device."
The article went on to say:
The size of the project raises interesting questions about Apple’s ambitions for its online operations. The $1 billion price tag is nearly twice the $500 to $600 million that Microsoft and Google typically invest in the enormous data centers that power their cloud computing platforms.Yesterday, the Edible Apple suggested that "Apple made the [Lala] purchase not so much for Lala’s technology or business, but more so to acquire the talent behind the company and their cumulative expertise with 'cloud-based music services'.”
Friday's New York Times reported that, with the purchase, "Apple would primarily be buying Lala’s engineers, including its energetic co-founder Bill Nguyen, and their experience with cloud-based music services."
If Apple moves to a subscription model, their iPhone could leave its smartphone competitors in the dust. And who's to say they have to stop with music. With that large a facility, Apple could also begin streaming novels.
Stay tuned . . .