Apple Dips Its Toe in Online Music Storage 

Major record labels preventing customers from buying 'music with an insurance policy,' but that could soon change.

In the age of digital everything, hauling around boxes of CD jewel cases during the yearly move is especially grating. Can't purchased music live forever online, streaming or downloading to any personal device? The problem is legal, not technical, but maybe not for long.

This month, Apple flouted major record label wishes by allowing subscribers to upload purchased music to its servers, to store, share, stream, and download it, allegedly without paying a license fee. Record labels have sued smaller companies for doing much the same thing, but Apple's legal heft, and the pending outcome of a court case, may tilt the balance of power toward consumer freedom. Apple declined to comment on for this story.

Digital music has been upending the traditional recorded music business for almost fifteen years now. The birth of the small, compressed MP3 music file gave rise to famed sharing site Napster. Then Apple killed the Discman with the deliriously successful iPod, followed by the cult of the iPhone and now the iPad. As these shiny new toys and ever-smaller computers proliferate through the home, so does the hassle of managing all of them. The solution has become the Cloud.

Almost everyone is now used to fetching their e-mail from remote services such as Gmail and Yahoo. This type of "cloud" service — so named because your data exists off-site, somewhere in "the cloud" — has since progressed to files bigger than e-mail, such as pictures. Photo-sharing sites Flickr and Picasa allow users to upload their snaps to the cloud and share them for no monetary charge. That cloud capability is creeping into music files too, says MP3Tunes.com head Michael Robertson.

In early August, Robertson noticed that with just a single software update, Apple customers who rent storage space on Apple's servers could begin uploading their music and streaming it down to their iPhones. But the process isn't very much fun, Robertson says. "You can only play one song at a time. The song plays and it stops. You have to go back to initiate another song."

Yet the Apple update represents something massive, watchers say. Apple is dipping its toe into the turbulent cloud music space. They're engaging in virtually the same practice as Robertson's MP3Tunes.com service, which got his company sued by the EMI record label. EMI did not respond to requests for comment.

MP3Tunes.com advertises a free "music locker" where users can upload their music then store, stream, and download it to their various devices. Major labels think they should be paid when customers use MP3Tunes.com, and for three years the two have fought in court.

Since sales of recorded music have plummeted, major record labels are trying to get every possible dime they can from tech companies, watchers note. For example, popular 'net radio company Pandora paid out 60 percent of its 2009 revenue in royalties, president Tim Westergren told CNN. That's much higher than satellite radio. (Terrestrial radio pays no performance royalties.)

According to Digital Music News, major label legend and former Elektra chief Jac Holzman told an audience at the Bandwidth Music Conference August 27 in San Francisco that, "We're not a music industry anymore, we're a rights industry."

Fellow cloud music service provider Daren Tsui, head of mSpot.com, says the threat of lawsuits and the legal gray area surrounding licensing keeps it out of consumer hands.

"It's certainly not the technology," Tsui said. "It's definitely hard to deal with the labels."

mSpot — which calls itself a cloud media company — started offering a free music service in June. They do not have a license for it, but label negotiations are ongoing.

"Right or wrong, I think the labels feel they need a license for any locker service for streaming or copying into the cloud," Tsui sais. "Obviously we, along with others, don't feel that way. We feel that there are certain areas where it does fall under fair use."

Yet Tsui and Robertson agree that cloud music could pose an existential threat to record labels. Fans often buy the same album multiple times. CDs get worn out or lost, or an iPod drowns. If music users put their tunes in the cloud, there's ideally no way to lose or destroy them.

"It's music with an insurance policy. 'Hey, you got this song no matter what: your house burns down, you lose your mobile phone, your computer breaks, something gets stolen, you can always come back and get this song.' That's what it should be," Robertson said. "It's a threat or an opportunity depending on whether you are a music company or a technology company."

The two industries are at loggerheads, and while it's easy to legally push around MP3Tunes.com, Apple's legal team has more heft. Tsui says he sees both sides.

"We understand that they feel these services could cannibalize sales or subscription services like Rhapsody or Napster, but we need champions for the users as well saying, 'Look, these are songs somebody bought or possessed, I just don't feel right to charge them to listen to those songs they already own.'"

Tsui said that since Apple's new update allows users to rip, upload, and share music with others via a single link, it's a de facto Napster for 2010. "I think labels should be going after Apple," he said. "I can't believe Apple is really doing it. ... Apple is getting away with murder but nobody is doing anything, I guess."

Tsui says the whole sector, including Apple, is closely watching the MP3Tunes.com case, which may come to a judgment in the next 45 to 60 days. "Everybody's watching it."

Robertson is optimistic the judge will rule in his favor, given recent verdicts by other tech companies. "This is going to be big," Robertson said. "If we prevail, then [Apple, Google, and others] have enormous leverage to do the same thing we do. Imagine the next iTunes update says, 'Hey, in four days I'll put all your music so it's available on iTunes.com, so you can play it on your iPhone and iPad. Is that what you want?' You click 'yes' and then boom, it's done.'"

Tsui says that in the long run, every 'net user will flock to the cloud for a variety of media needs.

"People have smartphones, iPhones, Android phones, Internet-enabled set-top boxes, TVs, not to mention PCs and laptops," he said. "Right now, I get a CD and rip sixteen new songs, and now I have to sync them ten different times? That's just crazy to me."

The shift is already happening, says Robertson.

For example, this year 700,000 people in the United States bought a Roku, a small sub-$100 device that plugs into the Internet and a TV to let people instantly stream movies from Netflix. MP3Tunes.com users can also stream their entire music library to their home theater system with Roku.

"If you make it easy, people are going to take advantage of it," he said. "It'll soon be as commonplace as today's web mail and online photo sites."

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