Report: Apple To Acquire Online Music Service Lala

Reports of Apple eyeballing Lala first surfaced in Bloomberg News, which on Friday quoted two people "familiar with the matter" as saying talks were progressing.

Launched in 2005 by Seven Networks founder Bill Nguyen, Palo Alto, Calif.-based Lala is backed by venture capital partners, including Bain Capital Ventures and Ignition Partners. The service offers access to more than 8 million songs through license agreements with major labels like EMI, Warner Music Group, Sony BMG and Universal Music. Unlike a download service, users can stream the songs only, but at 10 cents a song, can essentially buy whole albums for regular streaming for only $1.

If Apple buys Lala, it would give Apple an online, pay-to-stream Web music platform to go with iTunes, the long-running music store that Apple launched six years ago and now offers more than 11 million songs for purchase. Lala already has an iPhone app, which launched last month.

Bloomberg's report suggested that Apple would acquire Lala to better compete with rival tech giants like Google, whose One Box music service allows users to search for, index and buy content from music services like Lala and iLike. The former head of Universal Music Group's digital unit, Larry Kenswill, told Bloomberg that "Apple is wise to cover its bases because it's only in the download business."

Web-based music subscription services and online radio stations have been attractive acquisition targets this year.

In November, MySpace, which is owned by News Corp., acquired iLike and Imeem. Many of those acquisitions have arrived amid a battle between music copyright holders and online services like Pandora, which in July successfully negotiated a new royalty fee structure with the major labels.