Music Industry's Blessing Lifts Hopes For iCloud
Apple CEO Steve Jobs will come back from medical leave to announce a new music service at the company's annual developers conference on Monday. The service will be called iCloud, and it's rumored to have been in the works for the last year. All indications are that, for the first time, the major record labels and music publishers have gotten behind a service that will let you access your entire iTunes collection from almost any Internet-connected device.
People are getting more comfortable with storing and accessing content on the Internet from photos to movies, Forrester analyst Charles Golvin says.
"This idea that my content doesn't have to be sitting on my hard drive, or on my phone, or on my other device for me to be able to access it — as long as I have a network connection, I should be able to get to it," he says.
On Monday, Apple will be the third big company to introduce a service that will let you access your music from so the so-called cloud. Google and Amazon have introduced cloud music services, but Golvin says they've been a bit slow.
"With Google Music Service, it starts scanning your library and uploading songs in the background," he says. "Of course, some of those will be available to you, depending on which ones have started the upload."
And when you buy new music, you'll again have to go through the process of uploading before it's accessible. There's a reason for that. Google and Amazon launched their services without agreements with the major record labels and music publishers.
The Big Difference
"There are certain laws and procedures that have to be followed," Jeff Price, is the CEO of the digital music company TuneCore, says. "If they're not, it opens up anybody to huge amounts of legal liability where they can be sued out of existence."
Take a big hit like Whitney Houston's "I Will Always Love You," written by Dolly Parton and produced by Columbia Records.
"You have a recording that actually has two copyrights to it, one for the recording of the song — and that's owned by Columbia Records," Price says. "And the other for the song itself. And that's owned by Dolly Parton."
In the terrestrial radio world, every time the song gets played, both Dolly Parton and Columbia get paid. Rights holders have been applying the same copyright laws to the online world. So, every time a streaming service like Pandora plays "I Will Always Love You," it pays royalties for the right to stream that song from its servers to your computer or mobile device.
So, without royalty agreements, Amazon and Google can't stream anything. Instead, they're in essence maintaining a hard drive for you in the cloud, where you access the music you've put there.
By all accounts, Apple's service will work differently. Say you want to hear Adele's "Someone Like You." iCloud scans your iTunes collection, matches the ID for the song there with its iTunes ID, and streams the song from's Apple's locker.
Though other companies tried to reach agreements with the labels and publishers, Apple is reportedly the first company to make a deal with all four majors. Golvin thinks that's because labels have already made money from Apple's iTunes store, and Apple has the most popular music software.
"The fact that so many people have so much content invested in their iTunes libraries today that they can monetize in some way, then they see a revenue opportunity there that they may not see from somebody like Google," he says.
In other words, the music industry went with the devil it knows, even though the record companies have long complained about Apple's dominance of online music.
The Music Industry Places Its Bet
Right now there is a lot of unconfirmed speculation about what iCloud will offer. But, Gartner analyst Mike McGuire thinks it will have to offer extras to consumers to entice them to pay for the service — like being able to play an entire song or maybe even an album at least once before you buy it.
"What extends this and makes this potentially more attractive to consumers is if they have that ability to do more sampling of full-length albums or songs or things like that," Gartner says.
Apple's cloud service may also present the first opportunity for record labels and song writers to collect money from unauthorized copies of songs. Because of the way iCloud works when it matches a song ID in your collection with the ID in the iTunes data base, rights holders will get paid — most likely out of a fee Apple will charge users for the iCloud service.
"And it's just based on what's in a user's library, not necessarily where they came from." McGuire says. "You know, there may be some positive in that, if there's a substantial amount of content that came from a P2P source, there may be a little recoupment of some of those files that were distributed via P2P software."
Because Apple has had such success with so many of its music products there is a lot of anticipation about iCloud. But, as McGuire and others point out, Apple has had its failures. It already has a cloud service for photos and other content called Mobile Me that's been a flop.