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?