Apple Inc is in early talks to acquire digital music service Lala, according to a person with knowledge of the matter.

The iPod, iPhone and Mac maker is seeking new ways to expand its iTunes online store to move it beyond being a predominantly download service for songs, said the source, who asked not to be named as the talks are still confidential.

ITunes is the dominant 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 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 talks were first reported by CNET and elsewhere.

The Lala service allows users to stream 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.

Apple spokesman Steve Dowling said the company would not comment on rumors and speculation. Lala did not return a call seeking comment.

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)