Apple announced the closure of the online music streaming site it had acquired only a few months ago. Lala was originally established by Bill Nguyen, as an online music store. This service had many subscribers who created playlists from the music they uploaded by themselves. Users purchased their own music, bought compact disks and purchased web songs cheaply.

Apple bought in December 2009 only to shut it down after running it for only 5 months. Existing members who had credit at the service are given special codes to use on iTunes instead. The reasons for the shutdown are unclear but there are many speculations surrounding the shutdown. Lala provided music for free on the web, but allowed users to play a song only once. They have the choice to play the song again for a fee of $0.10 on the web only. The song can be downloaded to the iPod at $0.89 of which Apple pays a share to the music owner.

One school of thought also has it that, Lala was shut down because of the fundamental flaw in Lala’s business model that could not make it run independently. Lala’s music model sells the music at a very low cost, assuming that users will listen for only a few numbers of times, so they gain money out of that. This however contradicts with users’ thoughts, which have it that they must have music for free and therefore once they paid something for it, they must listen more to benefit from their spending. Users download the music to their iPods and play over and over again, causing a loss to Apple’s Lala. So the move to shutdown Lala was a strategic step of Apple to stop losing money.

Some analysts are speculating that Apple wanted to let customers of its iTunes buy and listen to music without downloading. This was to provide a cloud kind of music service, allowing users to gain access to music stored on servers via their mobile phone networks. Apple was to benefit from this kind of service with lower costs and playback applications that are accessible even in areas where cell phone network coverage is poor or unavailable.

It is also highly speculated that, Apple failed to analyze the operations of Lala and how it aligns with their business model. At the time of purchasing Lala, Apple was only concerned about dominating the online music streaming service industry and so thought purchasing Lala, which was a giant in the field at the time, was the best thing to do. They failed to look into the details on how Lala was run and how they could make their money out of it. So when they were overwhelmed by the problems existing and had no clue how to solve them. The best option they could think of was to shut it down.

It is however believed that, Apple may come out with something new soon, though no one has a clue as to what. They may decide to incorporate it into iTunes or implement another kind of iTunes.