had Apple on its knees

The good people at ZDNet have uncovered a dark chapter in Apple’s past which the fruity purveyor of rich kids’ toys might like to forget.

In 2009, the online music company Lala was doing rather well. It had a service that allowed customers on any platform to preview songs in full, for free, and a “music match” capability that scanned your library and gave you full online access to your collection from any PC or Mac. It could sell music that consistently undercut Apple’s iTunes.

It was seen as something that could really give Apple a run for its money. It was completely and utterly innovative and could have really taken the industry places.

Apple bought the company in 2009 and while it was thought that it wanted developer talent, it was believed that it wanted the technology to further iTunes.

What really happened was that Apple blocked the company from coming up with any new innovation and then in April 2010 it shut up shop. Apple wrote off its investment and Lala was consigned to history.

What is interesting is that Lala was founded by Bill Nguyen, who went on to found Color. Both outfits were bought by Apple and Color also cost Cupertino a bundle before it tanked in similar circumstances.

A designer who worked for Nguyen, Aubrey Johnson, recently wrote a blog, which has subsequently been pulled, which said that while Lala had not done that well, in 2009 when you Googled a song, the first result was a Lala result. Not an iTunes result.

Moneywise, Lala was often a better deal, particularly when the company partnered with Google.

Eddy Cue’s glorious iTunes empire was at risk and Nguyen started a bidding war for the control of the company. Nokia only offered $11 million for the outfit and Nguyen called Google.

Google offered a better deal, but it was still lower than Nguyen wanted, so he called in a few favours and got a meeting with Apple.

Cue knew if Google obtained Lala, the ownership of the service coupled with search dominance could kill off iTunes or at least cause it some damage. To make matters worse, Nguyen was getting better deals than him thanks to its connections with Lala’s investor, Warner Brothers Music.

Cue bought Lala for $80 million with an additional $80 million in retention bonuses for the remaining employees, valuing the entire deal around $160 million.

Apple didn’t want the technology and did not even want the people. Most of the Lala team followed Nguyen as he left, even though it cost them millions in options.

While Apple needed a music streaming service, it still does not have one, and we are talking about years later. Apple did eventually introduce iTunes Match, but that service requires a subscription fee and isn’t an open, browser-based concept like Lala’s.

Although this makes Apple look like the aggressor, it seems that Lala might have been part of a cunning plan by Nguyen to milk cash out of Apple. Nguyen and his developers started another company –  the quaintly misspelt Color.

Color sold to Apple for $7 million even though it was not making money. This is because it is sitting on a patent for a proximity-based photo sharing app.

This is a Facebook enabled realtime video and photo sharing app available on iOS and Android, but only through Verizon. It only attracted 440,000 monthly active users. Forbes  thinks Nguyen crafted his company for an Apple buy out by creating some specific patents to appeal to Apple in the area of multi-device content sharing.

Titles for the recent applications are, “Sharing Content Among a Group of Devices,” “Sharing Content Among Multiple Devices,” “User Device Group Formation,” and “Storage and Distribution of Content for a User Device Group.” These all could offer improvements to Apple’s Facetime, which the company does not want out there.

If Apple allowed Google to buy Color it would give the search engine access to better technology, so it bought the company before there was a bidding war. Nguyen collected a pay out on Apple’s desire to suppress interesting technology, twice.