SAN FRANCISCO/NEW YORK (Reuters) - Apple Inc has acquired digital music service Lala, as the dominant online music retailer explores new models for selling songs.
Terms of the deal weren't disclosed by Apple, which confirmed the purchase on Friday.
ITunes is the leading music service in the United States with more than 70 percent of all digital music sales and it is the leading music retailer overall.
But newer music streaming services from the likes of News Corp's MySpace Music and Spotify have begun to win over music fans in the last year.
"Apple buys smaller technology companies from time to time and we generally do not comment on our purpose or plans," Apple spokesman Steve Dowling said.
A source familiar with the matter said the iPod, iPhone and Mac maker is seeking new ways to expand iTunes to move it beyond being a predominantly download service for songs. The source asked not to be named.
"Apple recognizes that the model is going to evolve into a streaming one and this could probably propel iTunes to the next level," said the person.
The iTunes store offers more than 11 million songs. Apple has sold billions of tracks through iTunes since its launch in 2003.
The Lala service allows users to stream from the Internet any tune in its catalog of more than 8 million songs once for free, and then sells unlimited streams for 10 cents per track and MP3 downloads starting at 79 cents.
The Palo Alto, California-based company's investors include Bain Capital Ventures, Ignition Partners and Warner Music.
Lala founder Bill Nguyen said in October his company's revenues total less than $10 million. He said the company had about 100,000 customers.
Internet search giant Google Inc recently partnered with Lala to provide users song samples along with links to purchase the music.
Lala has also partnered with Facebook to offer music through the social networking site..
Reporting by Gabriel Madway in San Francisco and Yinka Adegoke in New York; Editing by Richard Chang and Carol Bishopric