New Possibilities Forming as Lala's Puffy White Cloud Rolls In

I am stoked about Apple's (Nasdaq: AAPL) acquisition of Lala. Why? First, iTunes users might actually get to listen to an entire song during a preview rather than just the old-school 30-second clip. That potential new option for iTunes is reason enough to be thrilled. But there's so much more to Lala.

Lala, on its own, is a browser-based streaming music service that lets you listen to full-length songs once, and if you buy them for just 10 US cents, you can listen to them forever -- while streaming them online. If you want to download the song for your iPod or MP3 player, it's another 79 cents. Plus, you can upload your existing library of songs to its cloud, letting you listen to songs you already own via the Lala streaming service, and songs that match the ones licensed by Lala get instantly moved to your library. How cool is that?

So, why does Apple care? Obviously Lala had the potential to become yet another streaming competitor to Apple -- it bested Apple in the ability to find a song and listen to it in its entirety, and then if you liked it enough to make it worth 10 cents, you could continue listening to it. Love the song? Download it.

Lala was dangerous to Apple in that it shifted the music discovery and buying process away from Apple's iTunes ecosystem. And while we're talking about music discovery, Lala also has some interesting social networking built in, letting users discover songs via friends, DJs or music reviewers.

Plus, Lala is smart -- the browsing experience is easy, elegant, and intuitive -- talk about taking a page out of Apple's playbook.

Worlds of Opportunity Here

The first thing I considered when I heard about the Lala acquisition was that Apple bought the company for the rights to streaming and selling music that it had acquired with the music industry. What's holding Apple back from letting users stream a full version of a song once from iTunes rather than just 30 seconds? While it could be a lack of functionality, I'm more inclined to believe that Apple can't get the distribution rights from the major record labels to offer it.

While Apple has ushered in a whole new world of mobile music listening with its ubiquitous iPod and iTunes ecosystem, the major record labels haven't been thrilled with the power base Apple has created. Long history here. The point is, if Apple buys Lala, Apple may also buy whatever rights Lala has acquired. However, there are some conflicting reports here, and none of those I've seen have open, on-the-record sources; the rights may or may not be transferrable.

It's possible that Apple is buying Lala just to buy some cloud-savvy engineers, but I doubt it. It's also possible that Apple is buying Lala to stifle a potential competitor rather than to innovate, but Apple's Steve Jobs sure seems to take steps with purpose in mind, and that seems to mean innovation more often than not.

So, how might Apple integrate Lala with its world of music? Obviously, iTunes could offer a streaming music service that integrates Lala's existing model. Lala would be a nice upgrade to iTunes -- anyway you cut it. In addition, it would let users more easily stream their music to their iPod touch, their iPhone, or any browser-based computer. Talk about mobility.

I only pack around a few hundred songs on my 16 GB iPhone, and when I'm traveling, which is when I also load it up with video, I sometimes get a hankering for more music. Pandora works pretty well, but it doesn't have the "my music" mentality of Lala that lets you pinpoint the songs you want to listen to.

Beyond the obvious mobile options, Lala also presents interesting uses for an Apple TV -- again, the ability to preview in full from your couch, as well as add songs to your library. Just another potential great option for extending your music universe.

Why Stop at Music?

Looking ahead, Lala could represent a new model for all media consumption in the Apple world. I can't imagine seeing an entire television show for the first time as a full-length clip, but using the cloud for storing content and streaming it means that iPhone or iPod touch owners could more easily stream their own videos.

Granted, there's plenty of tech holes that need to be filled in here, but the point remains: My iPhone is essentially tethered to iTunes on my Mac. If I'm in bed one night and can't sleep and want to watch a movie, or even just the good parts of a movie, I've got to tromp downstairs, wake up my MacBook, plug in my iPhone, and transfer the movie to it. With a streaming option, all my content could be more easily accessed on my iPhone, and I could watch it until my mind settled down and I drifted off to sleep.

Or say I'm at a friend's house . . . you can fill in the blanks. The point is, my media library will always grow in size at a rate much larger than the available hardware capacity for my devices. Apple knows this. Even if Apple produces a 120 GB iPhone or iPod touch, I can fill it with media left over. While I love the quality of media running directly on the hardware -- i.e., a TV show file on my iPhone -- streaming represents a much more flexible future.

Beyond the basic model you can extrapolate for Lala, the acquisition may also signal a loosening of the iTunes model. Might Apple create a subscription-type media model? It's possible. How about an advertising-based streaming strategy? The company has messed around with some patents that would compel attention to ads, so someone is thinking about it in Cupertino.

Might CEO Steve Jobs clutter his world with ads? That's hard to say, but the Lala model offers a middle ground -- just 10 cents to "own" a song in the cloud. Could that same model be used for television shows? Right now, $1.99 for a half-hour show is not always worth it for a show I'll watch once -- but $.50? Hmm.

Sooner or Later?

I don't expect to see anything innovative any time soon. Early 2010 might be possible if Apple should manage to produce its mythical tablet. Perhaps June would be more likely -- in time for Apple's Worldwide Developer's Conference or the company's "traditional" iPhone launch.

If Apple sticks to its major music announcement timeline, though, we'll be waiting until September. At the same time, Apple is building a 500,000-square-foot, $1 billion data center in North Carolina, which should open some time in 2010. It could be used to fuel the App Store, a new Mac OS X App Store, Mobile Me services, or much more.

Meanwhile, the sky is wide open for an Apple-shaped Lala cloud.