Reportedly, Apple was also interested in purchasing mobile-advertising company AdMob Inc which Google recently bought for $750 million.
For years the two companies have managed to stay apart with each focusing on a different area of the market; however, recent developments have seen the two companies begin to battle in more arenas then one.
Google first announced the Android mobile operating system to compete with the iPhone's, then they announced a browser to compete with Safari, an operating system to compete with Mac OS X, and even a music service to challenge iTunes.
The pursuit of Lala and AdMob indicate that the war has just begun. People familiar with Apple's thinking say the company wanted to acquire AdMob to profit off free apps and to prevent Google from learning details about its App Store.
Its even possible that the purchase of Lala was to head off Google who is getting more ambitious about digital music.