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The launch of music locker services by online retailer Amazon and search engine Google opens a new round of discussion on the future of music distribution. Are cloud based music services the main business models of the future music industry or is it just a hype with a lot of hot air in the cloud? In the following you like to answer this question.
Introduction: A Short History of Cloud-Based Music Services However, the idea to store music on web-servers is not brand new. The online music pioneer Michael Robertson, who founded MP3.com in 1997, offered a music locker service – MyMp3 – which allowed users to upload their CDs onto the web in order to access them whereever they were. Although this service was widely accepted by music consumers, the music majors rejected MyMP3, since no licencing fees were paid for the database to synchronize the CD-data with the locker service. At the end, the majors successfully filed MP3.com for copyright infringment and in November 2000, MP3.com was sentenced to pay US$ 53.4 million to Universal Music Group in compensation and eventually was taken over by Vivendi/Universal, which later sold it to CNET. Despite MP3.com’s failure, Michael Robertson did not give up to establish a cloud based music service and launched MP3tunes in 2006. However, history seems repeats itself. Music major EMI sued the music locker service MP3tunes as well as the online music search engine sideload.com, which links to audio files and shows where those files are on the net. The case is still pending. In the meantime other suppliers of music lockers offer their services. In 2007, Lala was introduced to public with Warner Music’s fiancial support. Lala gave users the option of either paying USc 99 to download one song or paying USc 10 for a Webhosted song that they can access from any Web-connected PC. Lala users could also stream any song in the catalog once for free, and kept up to 50 songs in their online collection. However, Lala Media Inc. was sold in December 2009 for US$ 85 million to Apple Inc., which shut down the service in May 2010. Since then media have speculated when Apple will start a cloud-based music service by itself. It lasted until June 2011 when speculations came to an end and Apple Inc. launched its iCloud.
Therefore. mSpot was claiming 750. To avoid legal problems. Cloud Drive enables customers to upload and store digital content (music. Therefore mSpot offers a scaling price scheme for storage capacity: The first 2 GB are free. US$ 10 for 50 GB and US$ 14 a month for 100 GB. Google’s Music Beta and Apple’s iCloud As we can see. which were already in the market before.com launched its music cloud service – Amazon Cloud Drive – in the U. which can be . which screens all music files from the users’ computer and displays them in an Audiogalaxy music list. photos) on Amazon’s servers. Then the music can be streamed to any Web-connected device. At this year’s MIDEM in Cannes. Amazon Cloud Drive and Amazon Cloud Player Online retailer amazon.000 registered accounts and 1 million uploads since the start of the service in June 2010. the forerunners do not offer more than a simple music locker service due to legal problems.However. since no upload of music file is necessary. in a narrow sense Audiogalaxy is not exactly a cloud based music service but a remote streaming offering such as Orb and subSonic. on March 28. Then the playlists can be accessed after signing in to audiogalaxy. The next wave of cloud based music services – Amazon’s Cloud Drive. Palo Altobased firm. which may cause a shortage in storage capacity. This is a different approach than mSpot. Google and Apple followed with their offerings. The next cloud based music service was put on the map by the former P2P file sharing platform Audiogalaxy in October 2010. before the giants Amazon. mSpot has to store each song individually on its servers. mSpot started their music locker business in June 2010. when Amazon.com from other computers as well as from iOS and Android devices. Audiogalaxy offers a remote streaming service. an application has to be downloaded for free from the Audiogalaxy-website. However. Google and Apple have launched their cloud based music services. Up to 10 GB will cost US$ 3 a month. 2011.S. Instead of a fully licensed service these music lockers only allow to upload copies of songs the music consumers have already purchased. However. a small. which enables the users to stream their music from all Windows and Mac computers. there has been already cloud based music service on the market. videos. US$ 5 for 20 GB.
com offers only 5 gigabytes of storage capacity. which allow users to upload their music library and from which they can stream and download files from Internet connected devices. since Amazon was not able to come to an agreement with the rights holders. not only on the purchase of music – via its online music store – but also on the purchase of server capacity. you have to pay for more storage capacity. Google Music Beta The web serch engine Google has lauched its cloud-based music service “Music Beta” on May 10. Craig Pape. And obviously the more people rely on digital libraries. Amazon is offering 20 GB of free storage space for a year and songs purchased from the Amazon online music store do not count against the storage quota. Ever since [Amazon Music] launched 3. It is similar to Amazon’s Cloud Drive. who led the company’s negotiations with the major labels. ‘I don’t want to shop at work because I don’t want the files stranded on my work computer.’ So we really felt it was important to give customers a central place to store. generally.g. which supports MP3 and AAC data formats. But they express frustration at things like.” However. which can be uploaded are limited to 20.’ or ‘I love the mobile app but the files get orphaned on my phone. blamed the labels for not coming to an agreement: “A couple of major labels were less focused on innovation and more on demanding unreasonable and unsustainable business terms.accessed by a web browser. music director of amazon. and by Android smartphones (but not by any other smartphone such as Apple’s iPhone). 2011 after negotiations with the major labels failed. However.000 and .” Instead of the planned match-and-scan service. thus. customers responded well.000 GB – that means US$ 1 for 1 GB. Amazon’sCloud Driveis also not more than a simple music locker. The business model of Amazon’s cloud (music) service is based. which is less space than an iPod Touch is able to provide. Google offers a simple music locker. across all our digital businesses.000 per year for 1. and give them the right interfaces to stream that. amazon. with a few differences: The number of songs. unveiled in an interview the motivation to launch a cloud-based music service: “We’re doing this in response to customer feedback. However. they feel frustrated if a hard drive crashes. Therefore. if a customer buys a digital album from the Amazon music store. US$ 20 for 20GB (including the 5 free GB) up to US$ 1. The stored music can than be played by the ‘Amazon Cloud Player’.5 years ago. so having online storage backup component was a big deal. e.com. Google director of content partnerships Zahavah Levine.
com are eventually allowed to use the beta version. calendar. If a song is no matchable to iTunes vast music catalogue it can individually uploaded to the locker. Apple iCloud It was Steve Jobs. but cannot access music from the cloud unless users are part of “Beta Music”. it is able to provide a cloud-based music service.2 and above) and files can be streamed by a rate of 320kbps. To sum it up. which was unveiled at the same press conference. Content.99 a year. In addition all new songs purchased in iTunes will be automatically synchronized to any Apple device. plays a crucial role in the iCloud strategy: Any song previously bought in the iTunes music store can be accessed from any Apple device by download. There he unveiled Apple’s cloud strategy. iPhone etc. Since Apple came to a deal with the labels and music publishers. The service is only supported by Android smartphones (version 2. Instead cloud-based servers will be connected with several Apple devices – iPod. iPad. which is called “iTunes Match”. Thus. who personally presented Apple’s iCloud on June 6 in San Francisco. which goes far beyond Google’s and Amazon’s music locker solutions. there is no music sharing function. applications. If songs were bought in other online music stores. There are no recommendation features. books. e-mail. in which the home PC will not be anymore the central device in the digital environment. contacts and backup software. The main motif for the launch of Google’s music locker was the completion of Google’s new music player app for Android devices. they can be synchronized to a scan-and-match music locker. Apple paved the way for a new business model in music distribution and consumption. but enables the immediate access to music with a mouse click. and especially music. it is not embedded in social media. Both services are free of charge. iMac. In addition. there is no new music experience . Apples iCloud is not that revolutionary as is could be.google. However. documents. These music related features are embedded in whole range of nine iCloud services including photos. It does not require users to upload their music libraries for hours. This scan-andmatch-feature costs US$ 24. who request an invite at music. Music in such a cloud environment is permantly accessable whereever you are – if you are online. The application can be used to play any music stored on Android devices. Google also wanted to follow Amazon as soon as possible in the cloud-based music service market also to overtake Apple with its ambitions to launch a fully licenced music cloud service.only US-users.
What’s the difference? A simple music locker works like an external Internet-based hard drive. in which accessibilty to music is much more important than ownership of music. where users’ digital music libraries are scanned and are matched with a database on a centralized service. Instead a “real” cloudbased solution works like a scan-and-match-service. However. this requires the support of the copyright holders. Technological. You have to upload your music track by track.connected with the iCloud. This could be a challenge. Since the use of a locker service requires a broadband Internet access. legal and economic challenges for cloud-based music services Technological challenges Figure 1: Music locker services vs. A further technological challenge is connectivity. “real” cloud-based music services The main problem is to provide a “real” cloud service and not just a music locker. especially the labels and music publishers. which is a very time consuming activity. since server space has to be reserved for each individual upload of the same title by different users. especially for the upload of music in the . Notwithstanding it is the first step in a digital music environment. And it will strenghten Apples already strong position in the market for digital music. In addition the cloud service has to provide vast amounts of storage capacity.
” The complaint highlights the main concern of the labels and publishers. transfer music from their MP3tunes lockers to their computers or other portable devices. It’s really disrespectful. the U. the joint venture between Sony Corp. the labels want the users loading their music only from one computer. either from the laptop or from the desktop or from the office PC. Amazon does not need licences to store its customers’ music files: “We look at it the same way as if someone bought an external hard drive and copy files on there for backup. I can’t make it any plainer than that.” Intellectual-property experts mainly support Amazon’s and Google’s position that they do not need licenses from record labels to offer such a “passive” locker service. Inthe complaint – the case is still pending –.S. the plaintiffs describe MP3tunes as “(…) integrated music service through which they [the music consumers] can listen to music on their computers. According to Wall Street Journal Martin Bandier. The refer to a decision in a 2007 lawsuit over a “remote DVR” system that Cablevision Systems Corp. According to Craig Pape. The users of cloud music services would only be able to download their . A Sony Music Entertainment’s spokeswoman raised concerns over Amazon’s unlicenced music locker service and kept all legal option open. Legal challenges: One crucial point of cloud-based music services is the question of music licensing. Therefore. but not from all three devices. Notwithstanding Capitol/EMI sued MP3tunes for copyright infringement in 2008. The labels also demand to restrict downloading to one (emergency) copy only. And you always have to be online while streaming the music from the web server. and the estate of Michael Jackson.” Representatives of record labels and music publishers foster this position.cloud. was very outspoken about Amazon’s decision not to licence with the right holder: “This is just another land grab. and of course we are considering all of our options. the cloud service providers already experiment with adequate cache procedures. and further distribute that music to others. as long as it maintained separate copies of the programs for each user. Supreme Court allowed Cablevision to store customers’ copies of TV shows and movies on central servers. In 2009. chairman of Sony/ATV Music Publishing. However. wanted to offer. which want to prevent users to share their music in the cloud like in P2P filesharing systems. obtain permanent copies of music stored in online ‘lockers’ provided by MP3tunes.
Universal Music Group and Sony Music Entertainment demanded a percent higher share of 60% (instead of 58%).music files a single time if they claimed they were lost. the labels demand that online music retailers embed personal purchase information in each song sold – a kind of digital receipt. are cited in the media that Google was willing to pay copyright holders a 70% share of all revenues derived from its cloud-based music service – 58% for the mechanical right holders and 12% for the for the publishers for performance. labels and music publishers have to find a way to monetize these services. Advances also played a crucial role in the negotiations. legal concerns of the labels and publishers are much more far reaching. Sources. the bottom line is not a legal. All music tracks without a proof of purchase would be assumed to be unauthorized and not accepted into the cloud service. The music majors have suffered from declining CD sales for years and the revenue from music downloads is flattening. mechanical and ephemeral licenses. Therefore. Apple and Google offer cloud music services without any features that the labels can charge licenses for. but an economic question. In addition. Google initially offered the indie record label sector a 53% slice of the revenue cake. To prevent this there is the demand for a central cloud service authority. Although EMI and Warner agreed to the proposed deal. which would administer all assignments or at least identities should be uniquely tied to a valid credit card or some other such verified identity. revenues from digital music sales will not play any crucial role especially for the major companies. which was declined by the indies. If Amazon. If cloud-based music services are the future of the music industry. All future downloads would be forbidden. According to MP3tunes founder Michael Robertson “iTunes has been inserting email addresses into every song while other retailers like Napster are using a unique receipt number. Google was willing to pay . The labels are also afraid that users would open several music accounts in “their” cloud in order to distribute or even sell the extra accounts. However.” Economic challenges However. which were involved in the negotiations between Google and the labels/publishers. Users should be prevented to upload pirated songs into the cloud in order to become legitimate.
the negotiations are still going on. It seems to be that Universal probably declined this offer. a music storage service requires a user to upload each song individually. Without licenses. which would need to be . it seems economically difficult to operate a sophisticated cloud-based service. which would be divided up by market share. since they will offer their music services without licenses. which requires costly storage capacities. For the latter. depite the launch of Google’s Music Beta in March 2011. However. in which the former will receive upfront advances and a considerable share (up to 70%) in the revenues generated by these services – revenues from renting server space. Since Apple Inc. Since Google – as well as Amazon – wants to build a full-service music platform that includes a radio function as well as a download store and a scan-and-matching cloud-database solution. came to an agreement with the labels and music publishers. (2) Both sides come to no deal.-market share is the first time lower than of Sony Music Entertainment’s share. In addition. since its current U. Universal Music Group reportedly demanded from Google to eliminate all pirate music sites from all search results and to remove YouTube user-generated content when a copyrighted song is not accompanied by a user-generated video. but by copyrighted materials. this opens the possibility to operate less costly and fully licensed scan-and-match-database solutions. which is more or less a simple music locker service. if we consider the labels’ and publishers’ demands.US$ 100 million to US$ 150 million to rights holders. Then cloud music services will by shaped by simple music locker services. In this scenario the copyright holders will not receive anything and they might sue the cloud music providers for copyright infringment. from premium subscription and from advertising. Conclusion At the moment two scenarios seem to be realistic: (1) The right holders (labels and publisher) come to a deal with all the relevant cloud-based music providers.S. it seems very likely that the other relevant players will already follow soon.
licenced by the copyright holders. that Apple has proven that black is white – in the cloud.” It seem to be. however. could arrive at a workable license for personal cloud music. or any company. the question how the creatives – musicians. In addition. In the case of fully licensed cloud services. authors etc. Now not only the future rules for cloud-based music services are written. For simple music locker services. . however. at a profitable basis. MP3tunes founder Michael Robertson is sceptical on that: “With the record labels wide reaching demands it’s difficult to see how Amazon. composers. it depends on the contractual arrangements with the publishers and label. – would profit from cloudbased music services remains unanswered. but the negotiations will also determine if an how cloud-based music service would be user friendly and can be operated on a financially sustainable basis. they will not receive any revenue. Hence. what eventually comes out for them.
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