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Apple's purchase of Lala sparks price confusion

Josh Carr
12.08.09
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Did Apple's purchase of music streaming service Lala cost the company $80 million, or 17 million? Probably the latter, at least according to Techcrunch. $80 million seemed like an awfully large price tag for a service that's only a couple years old. Michael Arrington at TC claims to have sources who say the purchase price was $17 million instead of the previously reported $80 million. He also explains that the sources aren't directly related to the purchase, they just have some mysterious knowledge of the situation.

Good source or not, the math makes more sense after reading into it a little bit more. Lala itself was valued at about $180 million but so far has only gathered $35 million in investments. With the theoretical purchase price of 40 to 50 cents per dollar, it could look like $80 million is a viable purchase price... but then you have to take into account that the company only raised $35 million in venture capital. Would Apple really pay more than double the company's total even if the valuation is much higher? If you take in the probability that Apple paid 40 to 50 cents per dollar on the $35 million, that would give you the $17 million figure pretty easily.

It's all up to speculation at this point: the price and the purpose. Some say that Apple doesn't give a rip about the actual streaming service, but that they really purchased it for the engineers behind the project. Others are getting excited to see what music streaming would mean to Apple and iTunes. I'd encourage you to leave your hope where it is... the possibility of a music streaming package on iTunes seems a little weak. However, we've been surprised before. Either way, the $17 million purchase price would make it a steal of a deal considering that Lala supposedly had $14 million in the bank. If Apple is allowed to retain Lala's deal with Google (search results and streaming for titles of popular songs), it would make that $3 million investment look pretty good.

In this article: apple, itunes, LaLa
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