Apple has confirmed the acquisition of streaming music provider Lala.  The move is significant (even though Apple appear to be trying to suggest otherwise) because it is one more piece in the gradually emerging puzzle that is Apple’s future music strategy, which for a few years now has remained relatively static.


Why is Apple’s music strategy in need of revision?


If the iTunes Music Store had evolved half as much as the iPod had over the last few years we’d have a cutting edge music service. Instead we have one that remains market-leading in terms of basic functionality (i.e. store to device synching) but behind the curve in terms of experience, discovery and community. Whilst the web threw up the likes of imeem, Spotify, Last.FM, MOG etc. the iTunes Music Store stuck to selling 99 cents downloads.  Don’t get me wrong the iTunes store is a crucially important platform that accounts for the majority of the current paid download market, but it isn’t yet equipped to drive the digital music market to the next stage.  In its current guise it is essentially a transition technology: with one foot in the distribution paradigm of selling units of stuff, and one in the consumption era of on-demand access.  It has done a great job of helping consumers take baby steps into the digital age, but has pretty much reached the limits of its potential as a music service. (You’ll note my continued and fully intentional implied distinction between the music store and the App Store – more on that in a moment).


So why buy Lala? 


Well it gives Apple a short cut into the social and streaming music arenas.  This is where the momentum of digital music has shifted and where Apple needs to be if it is going to remain relevant in the digital music landscape, even if revenue hasn’t yet shifted there.


But why would a high margin focused company pursue a potentially loss leading marketplace? 


I said at the start that Apple hasn’t innovated hard with the iTunes music proposition in the way that it has with the iPod.  It hasn’t done so because it hasn’t had the competitive pressure.  It still doesn’t have that pressure from music stores, but the rise of social music is where the music consumption story is going.  And that matters a lot to Apple.  From the ‘Rip Mix Burn’ campaign through to the launch of the iTunes Music Store in April 2003, Apple’s music strategy has been all about making the music experience on its devices as good as possible. 


The launch of Genius was the first step towards Apple opening a new chapter in music.  The Lala acquisition is another step.  Apple now has a rich set of assets it can put together to create a new, cutting edge music experience.  It has the rich usage data Genius is providing, the streaming capabilities of Lala and the every growing portfolio of music Apps and associated usage data.  The App store provides an important music asset which Apple would be wise to more formally integrate into its music offering. 


Where is Apple heading with all of these assets?


Apple of course often outsmarts those who try to second guess it, so rather than make a bold prediction that could be held up as a hostage to fortune, here’s a very brief synopsis of one direction in which Apple *could* head:


Imagine unlimited streaming music seamlessly integrated into a rich discovery based environment in which the user has access to Apps, videos and downloads (probably with some allowance for number of downloads allowed per month) all bundled into the cost of the connected device (note that I’m not limiting this to iPods).   There are of course many directions in which Apple could head, but this is the one I like best, not least because it’s essentially the vision I laid out for the music industry in my Music Product Manifesto


Whatever Apple does decide to do will all be about creating a differentiated music device experience. The music industry will be hoping that this next chapter in the Apple music story has more in common with the iTunes store chapter than it does the ‘Rip Mix Burn’ chapter.