Music Forecast: Cloudy

The latest trend in online music services is a feature set sometimes known as “cloud sync.”  With cloud sync, users can upload their MP3s to an Internet server, which will copy the files onto the user’s other devices, stream the music onto devices with MP3 players and Internet connections, or both.

Cloud sync is not a new concept.  It has been incorporated into several music services, including MP3tunes, DoubleTwist, Audiogalaxy, GrooveShark, Spotify (paid version), Catch Media, Rdio, and MOG.  But last week’s launch of Amazon Cloud Player has thrust cloud sync into the limelight and raises some interesting legal and economic issues.  Cloud Player is the client side of a cloud sync service that also includes Cloud Drive, Amazon’s existing online storage facility.

The legal question is: does a service provider need a license from music companies in order to offer this set of services?  The answer appeared to be yes… until last week.

Music industry provocateur Michael Robertson initiated the cloud sync trend in 2005 with MP3tunes.  MP3tunes let users stream their music to any MP3-enabled Internet device.  It also went a step further by identifying music in users’ collections and letting them skip the upload step if the music was already in MP3tunes’ server library; essentially all you had to do was prove you owned the music and it would be available online.  The music industry sued MP3tunes, alleging that it did not have the rights to do this.  The suit is unresolved at this writing.

Other services, such as Rdio, MOG, and Spotify offer cloud sync features as part of their paid subscription streaming services.  One would assume that cloud sync rights were included in the license agreements they negotiated with the record companies to supply music.

Yet other services, including MP3tunes, don’t actually supply music; they just work with users’ own files.  So does Amazon’s Cloud Player; it is separate from Amazon’s MP3 retail store (for the most part; more on this shortly).  And thanks to Ars Technica, we now know that Amazon doesn’t have music licenses for Cloud Player.

Amazon claims that it doesn’t need any additional license.  Its position is that it is merely helping users play music they already own and do what they could do with any number of existing online storage services.  Sony Music, for one, has raised concerns about this.

Amazon launched Cloud Player quickly in order to get to market before similar services from Apple as well as Google.  As David Pogue points out in the New York Times, Amazon is trying to give consumers reasons to use its music services instead of iTunes.  The major record companies gave Amazon licenses to distribute music in DRM-free MP3 format back in 2007 in order to create a viable competitor to iTunes.  It’s also noteworthy that Cloud Player uses Flash, so it won’t run on Apple iOS devices.

From that perspective, some record companies might want to welcome any features that Amazon can add that attract users away from iTunes — at least until Apple launches its own streaming services.  Amazon is most likely betting that the combination of offering record companies a better competitor to iTunes and “we have big lawyers, so go ahead and sue us” will deter the majors from taking legal action where they had done so before.

Yet there is another aspect of the legal argument.  As I argued in my discussion of Catch Media a few months ago, the odds are that most of the files that users upload to cloud sync services don’t contain music that they really own in the first place: it’s illegal downloads or ripped CDs from friends.  Record companies are concerned that cloud-sync services merely encourage unauthorized copying by making the copies more valuable.

Of course, a suitable license fee could ameliorate or eliminate those concerns, as it has done for Catch Media.  That brings us to business model issues.

Amazon offers Cloud Player for free… up to a point.  Users can store up to 5GB for free, enough space for roughly 1200-1400 songs.  If you want more space, you have to pay Amazon for it, US $1 per GB per year or about a third of a cent per song per year.  Yet if you buy MP3s from Amazon, Amazon includes the online storage space for them at no extra charge.

This mostly-free standalone cloud sync model, as opposed to those offered as part of paid monthly subscription services, will wreak havoc on other standalone cloud sync providers that depend on revenue from direct consumer payments (Catch Media),  advertising (GrooveShark, Audiogalaxy, DoubleTwist), or both (MP3tunes).  Catch Media’s one retail partner (Carphone Warehouse in the UK) charges users about $4/month for unlimited use.  That’s not sustainable pricing.

It’s pretty clear where this will end up: once Apple and Google enter the streaming market, cloud sync will be a “bullet list item” for all music services and will be expected to be entirely or mostly free.  Music services will need to find other ways to create value that consumers will want to pay for.  Sell T-shirts, maybe?

4 comments

  1. Great stuff here and nice links to other Cloud related articles. I am in the throes of writing commentary as well (go check out Digital Fool sometime tomorrow). What are your thoughts on copyright law and the studios perspective on Cloud services? How will Amazon Cloud service impact upcoming Ultraviolet?

    Also, since I’m inherently lazy, I recommend setting your links to open as new pages – in reading your article, I had to keep navigating back to your page and lose the articles….Just a thought to help Fools like me.

  2. I had thought of pulling more of the legal context and UltraViolet into the article but decided not to for the sake of brevity. But since you asked:

    UltraViolet is essentially a type of cloud sync framework; they just don’t use that terminology in the video business. They use the term “rights locker,” and the focus is more on downloads than on streaming, though UltraViolet supports both (with various limitations). UltraViolet service providers would be implicitly licensed to offer what we’re calling cloud sync here.

    As far as the copyright legal landscape is concerned, there is a case in the video world that bears on cloud sync: the movie studios’ litigation against Cablevision. The studios sued Cablevision for offering server-based DVR capabilities. Cablevision argued that it’s simply providing the equivalent of what a user can do at home with a TiVo or similar device.

    Cablevision eventually won at the appeals court level, and the Supreme Court refused to hear the case. Michael Robertson has asserted that MP3tunes should be let off the hook in its litigation with the music industry because of the Cablevision precedent, and the EFF and Public Knowledge filed an amicus brief in the MP3tunes case noting the similarities. The court has yet to decide the matter.

    It’s worth noting that copyright law treats personal use of video and audio somewhat differently. Personal, noncommercial copies of audio are allowed to some degree under the Audio Home Recording Act (AHRA) of 1992, which administers a levy on blank recordable media to account for home music recording — this being the only example in the U.S. of the types of levies that are common in Europe and elsewhere. Yet the AHRA only covers blank media that consumers can buy, such as audio cassettes and certain types of recordable optical media; it doesn’t cover hard drives, let alone “cloud storage.”

    As these types of online music business models proliferate, the music industry may find itself playing an expensive game of legal Whack-a-Mole by suing service providers one use case at a time. Or it could try to lobby Congress to expand AHRA levies to cover hard drives (as levies do in countries like Germany and Sweden) and online storage (no levies anywhere on that… yet) — a strategy that has lots of complications and that I would strongly disfavor, being a non-fan of levies in general.

    My view is that the record companies would serve themselves better by trying to offer reasonable, simple, and predictable license terms for service providers to cover these types of features. Service providers often don’t mind paying if the cost is reasonable and predictable. Meanwhile, the arguments about whether cloud sync features qualify as Fair Use can simmer in the background.

  3. […] Copyright and Technology points out, Amazon’s likely attitude toward the labels is “So sue me.” Simultaneously Amazon […]

  4. […]  It took the P+E experience as far as it could go on its own.  Just as various independent “cloud music sync” startups (such as Audiogalaxy, DoubleTwist, and Catch Media) collapsed when major music […]

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