Monday, December 07, 2009, 12:20 pm PT (03:20 pm ET)
Apple reportedly spent $80 million to acquire LalaApple's surprise purchase of music streaming service Lala last week has been given an unconfirmed price tag of about $80 million, placing a premium on the company.
Citing multiple sources, Peter Kafka of MediaMemo reported Monday that Apple's acquisition price was less than half of what investors agreed to pay in 2008. However, it is more than the $35 million the company had raised, meaning some — but not all — could see a return on their investment in the company.
However, Warner Music Group reportedly received about half of the $20 million it had put into Lala.
"Thats consistent with the $11 million write-down Warner took on its stake back in March," Kafka said. "But its also confusing. Most venture deals include a clause that gives investors the right to get their money backoften with a premiumbefore anyone else gets paid following a sale. So any price of $35 million or more should have paid back the music label in full."
Apple has not said much on its purchase of Lala, nor has it confirmed the price it paid for the company. Apple spokesman Steve Dowling has told multiple outlets the same line: "Apple buys smaller technology companies from time to time, and we generally do not comment on our purpose or plans."
Lala was apparently able to get a premium price from Apple because the company was said to have about $10 million cash on hand. That put Lala in a position of strength from a negotiation standpoint, as they did not have to sell immediately. The company's employees are expected to have begun reporting to Apple Monday.
If the $80 million price tag is accurate, it's still not a large sum for the company. Apple has more than $30 billion in cash and investments.
Last Friday, reports began to emerge that Apple was close to acquiring Lala. The news proved accurate fairly quickly: only hours later, sources were able to confirm the acquisition.
Lala had reportedly actively sought out Apple after its executives concluded that prospects for turning a profit in the short term were relatively slim.
Lala allows its users to stream any song in its library of 8 million tracks once for free. Unlimited streaming can be purchased for 10 cents per track, and songs can be downloaded for 79 cents.
Apple's interest in Lala remains unknown, though one analyst predicted Monday that the company could be interested in making iTunes a cloud-based service that would allow users to access their purchased content from anywhere via a Web browser. If true, the Lala software could play a part in Apple's $1 billion server farm in North Carolina.
On Topic: iTunes
- Apple, U2 reportedly working on secret new digital music format
- Apple creates dedicated portal for users to remove unwanted U2 album
- U2 'Songs of Innocence' giveaway drives 2M downloads as back catalog sales soar
- Apple links new U2 album to iTunes accounts, causes unapproved auto-downloads
- Apple releases iTunes 12 beta ahead of OS X 10.10 Yosemite debut