Lala to Go the Way of the Dodo

Sorry, “web song” buyers: now says its service will be shut down on May 31. Whatever Apple (S appl) is planning to do with Lala, the cloud-based streaming music service it acquired in December, it’s not going to keep the site functioning as it once did.

Established as a CD-swapping service in 2006, Lala repositioned itself as a forward-thinking cloud music site in 2007, offering a storage locker for its users’ MP3 collections while selling 10-cent web songs that gave buyers the right to stream tracks as many times as they’d like. It may have been ahead of its time; while relatively few buyers paid for web songs, the shift from owning music files to streaming them from the cloud (GigaOM Pro, sub req’d) appears to be gaining mainstream approval. Apple’s acquisition of Lala last fall augured a future in which the iTunes software allowed us to play songs from the cloud, although the company has yet to describe what that will look like in practice. Will it merely let us stream the song files we possess from any device, or will Lala’s innovative form of ownership — the ownership of a stream, at roughly a tenth the cost of an MP3 — be echoed in Apple’s new project?

Speculative reports have suggested that a new version of iTunes could appear as soon as June, although Apple has yet to reveal any new agreement with major record labels that would allow cloud-based streaming. (Lala’s license was reportedly non-transferable, should the company be acquired.) Any new agreement could involve a messy renegotiation in which Apple would make new concessions to the labels, as it did last year when variable pricing, DRM and bundling formats were in play.

Apple will issue iTunes store credit for Lala web song purchases as well as outstanding wallet balances.