SAN FRANCISCO — With its deal this month to buy the Web music service Lala, Apple is attempting to show a path to the future of music.
In this future, the digital music files on people’s computers could join vinyl records, cassette tapes and CDs in the vault of fading music formats.
Instead, music fans will use their always-online computers and smart phones to visit a vast Internet jukebox, where Gregorian chants, Lady Gaga tracks and the several centuries of music in between are instantly available.
For a small but growing cadre of music lovers, the vision is not that outlandish. Josh Newman, a 30-year-old technology consultant from Toronto who travels widely, pays $16 a month for Spotify, a subscription music service that, for now, is officially available only in Europe. Spotify allows unlimited listening to its online music library.
Since Spotify introduced an application for the iPhone over the summer, Newman has begun listening to the service almost exclusively, even though he has 35,000 songs on hard drives at home.
“The irony is, I don’t even go back to that music,” Newman said. “I’m almost too lazy. If there’s an artist I want to check out, I’d rather listen to it on Spotify than have to digthrough my collection.”
The idea of a limitless jukebox in the sky - or in techspeak, “in the cloud” - has been around for some time, but it is consuming music executives who now associate the word “funk” with more than a musical genre. The recording industry, which had $40 billion in annual sales a decade ago, is now bringingin half that. More ominously, the growth of revenue from digital downloads, still only a fifth of the total sales pie, is slowing.
The deal for the little known Lala was a small one from Apple’s perspective; the price was more than $80 million, according to a person briefed on the deal terms. Butit is generating a lot of interest because of what it may say about Apple’s plans for streaming music.
With an estimated $2 billion in annual revenue from iTunes, Apple is in a good position to guide consumers through the process of storing their music collections on Web servers and listening to them in new ways. It can also tightly integrate such a music service into the iPhone, the iPod Touch and all other existing and future Apple gadgets that connect to the Internet.
Users would no longer have to synchronize their music collections between devices, would not have to worry about running out ofstorage space on their phones, and could more easily share playlists and recommendations with friends.
Apple could also ask users to pay a monthly subscription fee for access to a Spotify-like cloud-based catalog of music. Two music industry executives said Apple had been considering such a subscription service for years, but could never agree on the right revenue split with labels.
“We generally don’t comment on our purpose and plans,” said Steve Dowling, an Apple spokesman.
David Pakman, a partner at the venture capital firm Venrock and the former chief executive of the download service eMusic, said that Apple “could accelerate the move to media in the cloud more quickly than any other company can.” The acquisition ofLala, he said, “tells us they’re doing it.”
Other recent developments in the music and technology businesses also suggest an impending shift in a century-long approach to music in which people considered it to be something they owned, either in physical formats or digitally on their computers.
In August, Spotify introduced its iPhone application, which stores temporary copies of songs and playlists on the phone so that music keeps playing even when the device drops off the network. Spotify’s chief executive, Daniel Ek, said subscriber numbers had jumped significantly since the introduction of the app; he would not give exact figures.
The iPhone application “was a huge step toward aparadigm shift where it’s no longer about a la carte purchases, but access to music,” Ek said.
Spotify, based in London, hopes to introduce its service in the United States at the beginning of next year, although people briefed on its discussions with music companies say that the labels were resisting a component of the service in which music would be available free, supported by ads.
Pandora, the free Internet radio service, offers an application that continues to be among the most popular apps for the iPhone, and the company says that 30 percent of its listeners connect over cell phones.
Meanwhile, MySpace, owned by News Corp., has acquired two cloud music services in the past month, iLike and Imeem. People briefed on discussions inside MySpace say it is developing a subscription music service to complement its free, ad-supported MySpace Music, a joint venture with the four major music labels.
Courtney Holt, president of MySpace Music, would not discuss specific plans. But consumers care less about how music is delivered, he said, and more about finding new ways to share and discover music with their friends.
Technology start-ups have hoped for years that the vast selection and convenience of Web-based music offerings would lure people into spending a few dollars a month in subscription fees. That business, for companies like Rhapsody, jointly owned by RealNetworks and MTV,and Napster, a division of Best Buy, has not shown real promise.
But with the added appeal that such services can now be accessed on smart phones, many entrepreneurs are reconsidering that model. “There’s nothing sexy about an MP3 on your computer,” said David Hyman, chief executive of Mog, which introduced a subscription service this month called Mog All Access. “I don’t think consumers care where the music is stored, as long as they can get it when they want it.”
Business, Pages 25 on 12/21/2009