The Inside Story Of How Apple Bought Music Startup Lala, And Then Bought It Again

Lala was the pioneer in online music streaming before services like Spotify and Pandora really took off. If you Googled a song pre-2009, a Lala link was the first result. Founded in 2005, Lala underwent some business model changes until it became a full-fledged music streaming site. A partnership with Google’s Music Beta and good connections with the record industry allowed Lala to grow and gain attention from bigger tech companies.

It made sense for Apple to buy Lala in December of 2009. Lala.com was shut down in May of 2010, and Apple has since introduced products like iTunes Match. When Lala was bought, we all knew that Apple had paid around $80 million for the small startup. Now the inside story of how the deal was reached over dinner at Steve Jobs’s house has surfaced.

Aubrey Johnson is a designer who worked with Lala people after the Apple acquisition. He explains how Lala founder Bill Nguyen had received offers from both Google and Nokia, but the bids were too low. Nguyen pulled a few strings and got a meeting with Apple to ask for a higher offer. Nguyen knew that Lala’s good ranking in Google search would ultimately undermine iTunes sales. The top executives at Apple granted him an audience:

In late November, Nguyen was seated at the dinner table in Steve Job’s home on Waverly St in Palo Alto. Also present were Eddy Cue and Tim Cook and other Apple executives. Steve led the conversation while eating a beet salad:

“I’m going to give you a number, Bill, and if you like it, let’s do it and just be done with this whole thing. Okay?” Bill agreed.

Jobs passed a piece of paper to Nguyen and Bill nodded. The deal was done.

Lala was bought out for $80 million plus an additional $80 million in retention bonuses and stock options for employees that stayed on at Apple through the acquisition. Not a bad deal given that Nokia had only offered $11 million.

The story gets better. Soon after the deal was closed, Bill Nguyen left Apple to start Color, the photo sharing app that generated a lot of buzz back in 2011. Nguyen’s employees from his Lala days were loyal, and many engineers left millions in stock options at Apple to work at Color. After Color failed, Apple swooped in and acqhired around 20 employees back for $2-$5 million. So Apple got the talent back from its Lala purchase at a significantly cheaper price than it would have cost if the engineers would have just stayed on at Apple in the first place. Brilliant.

Apple is rumored to launch a Spotify-like ‘iRadio’ streaming service this year if negotiations can be reached with record labels. What are the odds that Lala engineers have been working on the project?

Source: Aubrey Johnson

Leave a ReplyCancel reply