Lala, the online music service, will be shut down on May 31, just five months after Apple Inc bought the start-up fueling speculation the iPod maker plans to launch a new Web-based version of iTunes.
Apple is widely expected to use Lala's 'cloud' technology to integrate a Web subscription service into its popular iTunes Music Store. Such a service could also be used for other digital entertainment like TV shows and movies.
Apple iTunes spokesman Jason Roth declined to comment on the company's plans after it shuts down Lala.
A notice on Lala's website on Friday said it will refund users who have already paid in advance for songs they had yet to download either with cash or iTunes credits.
ITunes, which is mainly accessed by users as a desktop based application, was in danger of being left behind by Web-based services like Lala, Rhapsody and Spotify which allow users to access their music collection wherever they are via an Internet connection.
Lala was founded by serial technology entrepreneur Bill Nguyen who is believed to have sold the company for around $80 million in December after reinventing the company's business model several times. Its original investors had included Bain Capital Ventures, Ignition Partners and Warner Music Group.
The Lala service had allowed users to stream from the Internet any tune in its catalog of more than 8 million songs once for free, and then sold unlimited streams for 10 cents per track and MP3 downloads starting at 79 cents. Nguyen said last October the company had about 100,000 customers.
The company has in the past teamed up with Google Inc and social networking site Facebook to offer music to users.
(Reporting by Yinka Adegoke; Editing by Bernard Orr)