Note that this isn’t an exhaustive list of any and all acquisitions made by the companies, but it is a good lay of land in recent years. (Click to enlarge)

Infographic courtesy of G+.

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While both Google and Amazon have already launched cloud music offerings of their own, which allow users to upload their music collections to remote servers for streaming on various devices, those companies both decided to launch without securing any special license privileges from record labels. Instead, both suggest that they don’t need any additional licenses to offer music owners a new alternative to local storage. Despite the stance, license negotiations are said to be ongoing behind the scenes, at least for Amazon.

Support from record labels shouldn’t be discounted as an insignificant advantage in the cloud music race. Proper licenses mean Apple will be able to make music available in the cloud directly from time of purchase, eliminating the annoying step of requiring you to purchase and then upload your music separately, as users have to do with Google’s offering. And, like the music service Lala it acquired in late 2009, Apple should be able to provide a service that scans your existing iTunes library and provides instant streaming access to all licensed music it has in its collection. Considering some users have huge existing libraries that would take hours or even days to upload using Google’s service, for example, this would be a non-trivial advantage.

Record labels are reportedly pulling for Apple in this case, since they’ve already been left out of the party by Google and Amazon. The hope is that Apple’s service will be much more attractive to users than either Google’s or Amazon’s, which could bring those companies back to the table and make them much more eager to negotiate new licensing deals.

Apple’s Worldwide Developer’s Conference begins June 6, and it’s supposed to be a software-focused event. A cloud music service is definitely a software product, and the unveiling of one by Apple at the event could help people get over an iPhone hardware refresh missing until later this year. If reports are true, all that remains before Apple can introduce the service is for a few remaining pieces to fall into place, so I think it’s likely we’ll see something musical at WWDC.

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The launch of a new mobile app called Color on Wednesday has caused a lot of buzz — not so much because of the app itself, but because of the massive sum of money the company raised before it even launched. A group of funds, including Sequoia Capital, gave the company $41 million, and Sequoia’s chunk (as Color proudly noted) is more than the fund invested in Google. Is this new app really as revolutionary as that implies? Maybe. But what’s more likely is that the VCs involved are betting the team behind Color will come up with something worthwhile for that $41 million, and they don’t particularly care what it is.

Color and its supporters claim the app creates a new kind of paradigm for photo sharing, in the sense that you share pictures not just with friends or a small group, the way you would with Instagram or Path, but also with people who happen to be in the same place you are. This makes it more like Foursquare — or a group-messaging app like Beluga — than existing photo-sharing services. And the app supposedly learns from your behavior and creates ad-hoc groups based on whom you are interacting with (see Darrell Etherington’s post for a more in-depth look at the app’s strengths and flaws).

Do people want to suddenly share photos with random strangers based on the fact that they happen to be at the same club? That’s the bet Color seems to be making. Which — as more than one person has observed — makes it a little odd that the company didn’t launch at SXSW, the giant music and technology festival that just wrapped up in Austin, Texas. An app based on something so real-time and social seems almost perfectly matched to that kind of social environment. (Color’s huge funding round has already sparked a number of satirical takes on the app.)

Sequoia said on Twitter that a company like Color comes along once or twice in a decade, and that’s why it decided to give the startup more money than it ever has to a pre-launch company. (Venture investor Eghosa Omogui says the funding implies a post-money valuation that is likely north of $100 million.) But Sequoia is likely talking more about the team involved than the app itself, since the company is headed up by Bill Nguyen — who sold his music-sharing service LaLa to Apple in late 2009 — and includes Peter Pham, founder former CEO of BillShrink, as well as former LinkedIn Chief Scientist DJ Patil.

Is betting that kind of money on a team, regardless of their idea, a good bet to make? Some would argue it is. In a recent blog post, Union Square Ventures partner Fred Wilson wrote about how much he regrets not investing in what became AirBnB. He thought the idea was dumb, but the team behind it was clearly motivated and represented all the things he likes to invest in. In other words, the team was more important than the idea they were pushing at the time. (Paul Graham of Y Combinator has posted the email exchange in which he tried to convince Wilson to invest in AirBnB). “We missed Airbnb [sic] even though we loved the team,” Wilson says. “Big mistake.”

Chris Dixon, an angel investor and co-founder of Hunch.com, made a similar point in a recent blog post about Dropbox. Dixon says when he first encountered the company, he thought it was a copycat file-sharing service just like hundreds of others that had been launched around the same time, and he figured its chances of success were slim to nil. Later, the company raised money (from Sequoia, coincidentally) and Dixon says he eventually realized the team was what was important, not the idea.

I think the only way they could have made that decision was by ignoring the space, competitors, etc. and simply investing in a super talented person/team. Dropbox is one reason I now have a strict rule to only invest in teams… you should always invest in people over ideas.

So will Nguyen and the rest of the star team behind Color manage to do something that is worth all of that investment? That’s the $41-million question. One thing is for sure: Another photo-sharing app, regardless of its unusual features, probably isn’t going to cut it. And it’s probably worth mentioning that the Valley is littered with the skeletons of high-profile startups that launched with big ambitions and lots of money.

Post and thumbnail photos courtesy of Flickr user Julian Fong

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Apple acquired Lala in December of last year, but shut down the streaming music service shortly thereafter. Now it seems Lala’s technology and personnel are being used to build a cloud-based video service, which could replace Apple’s current system for downloading movies and TV shows.

The rollout of Apple’s streaming video service could coincide with the introduction of the next version of Apple TV, which is expected to be sold for around $99. The device will reportedly run the iOS operating system, which is also used on iPhone and iPad devices, and have Flash memory installed rather than a dedicated hard drive.

According to NewTeeVee sources, Apple will also introduce streaming TV show rentals for 99 cents, half the price of its current download-to-own option. CNET reports that the new video service would also allow users to purchase movies once and store them on Apple servers, allowing them to access that content whenever they wanted.

The Apple initiative is similar to plans from the Digital Entertainment Content Ecosystem (DECE), an industry consortium that has announced a cross-platform digital rights management framework allowing consumers to buy a piece of content once and watch it on a number of supported devices. A cloud video service from Apple would presumably enable its users to stream movies and TV shows to their PCs, iPhones, iPads and the new Apple TV set-top box.

Moving to streaming is an important step for Apple, as its iOS-based devices are constrained by a limited amount of Flash-based memory for storing files. A typical hour-long, standard-definition TV download from iTunes is about 600 MB to 800 MB, and about twice that size in HD. That limits the amount of content that users are able to download and store on their Apple devices. A cloud-based, streaming service would give users access to their content only when they wanted it, alleviating the need for local storage.

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Lala features an 8 million song deep catalogue, which can be streamed by any user once for free. If you wanted to play the song more than that, you paid 10 cents and received unlimited replays. Download purchases were also available, starting at 79 cents per track.

No new users are being accepted to Lala as of last Friday, and the website will be shuttered entirely on May 31. That means anyone who paid for unlimited streaming options will also be cut off at that time. Apple has said it will be refunding paid subscribers with iTunes credit in order to compensate, but of course iTunes can’t match the 10 cent unlimited streaming deal.

So what’s Apple’s end goal in buying and then fairly promptly killing the service? Speculation abounds that it wants the intellectual property and staff in order to create its own rival to popular services like Pandora and Last.fm, while still funnelling yet more consumers to its hardware line.

But is it actually time for Apple to bite the bullet and accept that cloud-based streaming is the future of media distribution? I think the answer is no. Cupertino knows it doesn’t have to be ahead of the curve regarding media distribution so long as it continues to lead the way in media playback devices. iPod is still the category-defining brand in that regard, and the iPad’s million unit milestone just recently proves that Apple isn’t yet done reshaping the market according to its own vision.

Apple is shuttering Lala.com at the end of the month, that much is inevitable. What is far from inevitable is that this move will somehow lead to Apple launching its own streaming music service to fill the void. It’s much more likely that Cupertino made the purchase (which was barely a drop in the bucket, in terms of purchase price) to scope out the streaming music service from the inside, pull it apart and see how it ticks. From that vantage point, it would be that much easier to make an informed decision about how quickly Apple had to move into the space, and I’m willing to bet that what they found out is that there’s no hurry.

Shutting down Lala probably just ends a resource bleed and eliminates a potential iTunes competitor now that Apple’s gathered enough intel. So if you’re saving that iTunes credit they gave you for closing out your account for when Apple launches its own streaming service, don’t, unless you feel like waiting a long, long time.

Established as a CD-swapping service in 2006, Lala repositioned itself as a forward-thinking cloud music site in 2007, offering a storage locker for its users’ MP3 collections while selling 10-cent web songs that gave buyers the right to stream tracks as many times as they’d like. It may have been ahead of its time; while relatively few buyers paid for web songs, the shift from owning music files to streaming them from the cloud (GigaOM Pro, sub req’d) appears to be gaining mainstream approval. Apple’s acquisition of Lala last fall augured a future in which the iTunes software allowed us to play songs from the cloud, although the company has yet to describe what that will look like in practice. Will it merely let us stream the song files we possess from any device, or will Lala’s innovative form of ownership — the ownership of a stream, at roughly a tenth the cost of an MP3 — be echoed in Apple’s new project?

Speculative reports have suggested that a new version of iTunes could appear as soon as June, although Apple has yet to reveal any new agreement with major record labels that would allow cloud-based streaming. (Lala’s license was reportedly non-transferable, should the company be acquired.) Any new agreement could involve a messy renegotiation in which Apple would make new concessions to the labels, as it did last year when variable pricing, DRM and bundling formats were in play.

Apple will issue iTunes store credit for Lala web song purchases as well as outstanding wallet balances.

More importantly, it will offer a glimpse as to how mainstream consumers will listen to music in the coming decade. Indeed, Apple’s acquisition and integration of Lala reflects not just a shift in strategy for the company, but a paradigm shift for music consumption. Here’s how:

• Browser-based services are eclipsing desktop software as a way to hear music on a computer. Apple’s embrace of streaming isn’t as surprising as the idea that the company will allow consumers to listen to music without first downloading a piece of dedicated software. Apple could simply bake a streaming service into the desktop iTunes, but the fact that it would consider browser-based alternatives to that system is a major step that reflects an ongoing shift in consumer behavior.
• Apple is threatened by mobile applications that do what iTunes cannot. Over the past year, a variety of mobile applications have sprung up that give on-demand access to songs not stored in a user’s own library. For Apple, such apps essentially transcend or circumvent the storage limitations of the company’s own hardware. Apple has accepted subscription-based ones like Spotify’s and Rhapsody’s, but may have drawn the line at Lala’s long-teased app, which was to allow streaming of any song of which the user can demonstrate ownership from a web-based storage locker. By buying Lala, Apple can deliver a similar service in its own way, via a next-generation version of iTunes.
• The transition toward streaming rather than owning is slow, but real. Consumers know where to find streams — YouTube, search engines, MySpace, Spotify where available — but most still prefer to own MP3s of music they like because they can do what they like with them. (There’s no indication, by the way, that Apple is giving up on selling downloadable music files through iTunes anytime soon.) The shift to cloud-based music (GigaOM Pro, sub req’d) won’t be instant, and may never be total. But a smartly integrated way of giving consumers access to their existing MP3 libraries side-by-side with a new streaming option is very attractive. Lala knew this, and Apple can deliver it.
• Apple is still betting on owning music in a new way, rather than subscribing to it. One thing Lala wasn’t interested in was a subscription model, and neither is Apple. It’s unknown whether Apple will keep Lala’s idea of the 10-cent streaming “web song” intact, but that’s still a kind of ownership that represents a relationship with an artist or song, and reflects the listener’s identity. The fact that it costs less and comes from the cloud matches up with ongoing technology trends without disrupting that relationship. All-you-can-eat subscription services may be near their own tipping point, too, but Apple doesn’t look like it’s interested in going there.
• Older MP3 players aren’t connected to the future. Selling hardware is still the most important thing for Apple, isn’t it? Mid-decade iPods with no connectivity aren’t exactly dinosaurs yet, but they’ll suddenly look a lot more static if iTunes is streaming music from the cloud on iPhones and iPod touches. Meanwhile, a failure to embrace cloud-based music could have resulted in Apple ceding smartphone market share to other phone makers that do.

In its latest incarnation, Lala was a company that was exceptionally well-positioned in front of many trends — the shift toward streaming, downward pressure on the price of music, simultaneous and synchronized access to content via multiple devices — but one that hadn’t yet educated or convinced many consumers to be comfortable with paying for music without obtaining a song file. (It’s worth mentioning that someone who wouldn’t pay a startup 10 cents for access to a virtual “web song” might pay Apple for the same thing, as the more established company seems inherently more reliable.)

Lala’s model becomes much stronger inside of Apple’s system, while Apple gains flexibility to give music fans more options. Just as the turn of the last decade marked a shift to MP3s from CDs, as the aughts draw to a close, consumers are ready for cloud-based music to displace file ownership, partially if not completely. And with this acquisition, digital music’s largest player is accepting that change.

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