Edible Apple

Apple recently finalized a deal to acquire Lala, a four year old startup that lets users purchase and download songs or stream them from the cloud at a rate of $0.10 per song.  The purchase may seem curious on its own, but may be a part of Apple’s broader efforts to make a concerted push into cloud computing, enhance the iTunes experience, and differentiate the iPhone from all other smartphones in the process.

Apple rarely acquires other companies, but when it does, the purchases are typically strategic with a specific purpose in mind.  Buying companies wily nilly just because they seem cool or happen to be popular at the moment has never been Apple’s style.  Apple’s acquisition of Lala, therefore, raises some interesting questions.  The New York Times astutely points out that ” Lala’s licenses for streaming music with the major music labels are not transferable to any acquirer, and its service has not been a hit with mainstream consumers.”

So what gives?

Well, the Times notes that a person with working knowledge of the deal has indicated that Apple made the purchase not so much for Lala’s technology or business, but more so to acquire the talent behind the company and their cumulative expertise with “cloud-based music services.”

Which is interesting, because last February rumors circulated which had Apple working to implement a new iTunes feature that would allow users to stream their purchased media content remotely. The feature is, or was, known as “iTunes Replay” and reportedly worked as follows: Rather than transferring actual content from a computer to a device, iTunes would instead transfer a directory file with all of the pertinent metadata about the content a particular user has in their iTunes library.  With that information in tow, users could then relay that back up to the “cloud” and subsequently stream the corresponding files back down to their device from Apple’s servers.  This would enable the iPhone to achieve one of the holy grails of technology – endless storage. Or at least the illusion of it.

But all of that streaming would obviously require a ton of bandwidth, which brings us to part 2 of the puzzle – Apple’s ginormous data center in North Carolina.

This past summer, Apple hired Olivier Sanche, a former eBay Data Center executive, to head up operations at its planned 500,000 square foot data center in North Carolina.  Apple’s planned data center is massive, and easily one of the largest of its kind in the entire world.  To put things into perspective, Apple’s data center in Newark, California barely checks in at 100,000 square feet. Furthermore, Apple is planning to invest a staggering $1 billion dollars into the North Carolina data center, a figure which easily dwarfs the $500 to $600 million range typically used to set up large-scale data centers for the likes of Google and Microsoft.

Apple certainly needs beefed up infrastructure to handle things like iTunes content, MobileMe, and the juggernaut that is the iTunes App Store, but the sheer size and scope of its planned data center suggests that Apple’s plans regarding cloud-computing extend far beyond those services as we know them today. That, in conjunction with Apple’s recent purchase of Lala, suggests that Apple is planning to make a huge push into cloud computing sometime soon, and a streaming service like iTunes Replay may very well be at the center of that strategy.

Should Apple actually implement a streaming service into iTunes, it would certainly help Apple position the iPhone as the premeir smarthphone on the market, leaving rival manufactures scrambling to compete against an iPhone with limitless storage.