Back to Gartner for Marketers Blog

iTunes in the Clouds

By Mike McGuire | June 07, 2011 | 0 Comments

Apple’s announcement on Monday (6/6/11), gave us the company’s take on the notion of what a cloud-based media service can be – one that preserves the value of an a la carte sales model for downloads (in this case) while extending the value of its customers’ investments in iTunes by simplifying the management of their libraries.  The company might also have figured out a way to make some revenue for the music industry from all those years of file-trading and BitTorrenting, not to mention CD ripping.

 Thank iTunes Match for this. This new service, which Apple plans to charge $24.99/year, will add non-iTunes music files to the company’s iTunes in the Cloud application which automatically backs up and synchs iTunes purchased music to all of a user’s devices wirelessly.  What Match does is scan the user’s library and if it finds copies of songs/albums that the iTunes store has licensed for sale, it will replace the user’s previously acquired copy in their iTunes in the Cloud account with a version encoded at 256kbps in the AAC format. (So Apple saves on the costs associated with having to ingest and transcode uploaded content that is, in effect, a dupe if it has a match in the iTunes store’s licensed content.)  But any songs/albums that Match cannot ID and find a licensed version in the iTunes store catalog would be uploaded to the user’s iCloud account and the user can manually add them to various devices.  

This contrasts with the first-to-the-clouds announcements from the online music subscription services and, more specifically, the recent announcements from Amazon and Google touting their cloud music storage lockers and the ability stream the music to a device or a browser app.

  •  The subscription services from companies such as MOG, Rdio, Rhapsody and (in some European countries) Spotify, charge users a monthly fee of $4.99 for broadband-connected PC access and $9.99/month for access to the service via apps for smartphones and tablets. Users either stream to their PCs and connected devices and can also cache content via the application for listening while offline.
  • Amazon gives 5GB/month for free, charges $1/1GB so $20/year for 20GB, $50/year for 50GB, and so on up to 1TB for $1,000/year, but does not count songs or albums purchased from its own MP3 download store against the storage locker’s total.
  • Google has not announced pricing for its Music Beta offering but it is billed as a service that scans the user’s music library, uploads the non-DRM’d files and can stream the content to a browser or smartphone/media tablet application.

Now, what’s interesting about the Amazon and Google offerings is that in the run-up to and the follow-up from their respective launch announcements, both vendors seemed to directly challenge the music labels and publishers. First, Amazon bluntly stated in press statements that it didn’t need to discuss any sort of licensing with the labels. Second, Google, in announcing their service publicly stated that the service wasn’t what they wanted because of contentious licensing discussions with the labels and publishers.

While iTunes in the Cloud is a beta, the announcement on Monday made clear that the company is iTunes users to the cloud in a way that preserves the sell-through download model while and – if stories like this are true — doing something no other company’s figured out how to do: extract some revenue from the millions of users music libraries that contain illicitly obtained music via file-trading software.  While also extracting an additional “tax,” if you will for years of CD ripping (and, yes, I do remember “rip, mix, burn”). 

There are some unanswered questions that I believe will need to be answered between now and when Match is opened up:

  • 1)    What should be consumer expectation that their music collections that aren’t matched by Match with iTunes’ catalog remain protected from the prying eyes of rightsholders’ ttorneys or the lawyers with the Recording Industry Association of America (RIAA) who might want to identify and target files they believe might have been obtained via illicit file-trading application?  Has the music industry decided to focus on the potential long-term revenue from services like Match and ignore the perception that enabling Match and similar programs would, in the eyes of some, mean the labels are forgiving or condoning consumers’ use of file-trading technologies?
  • 2)    As important, what sort of indemnification does Apple have against labels, publishers and other stakeholders filing claims that iTunes Match somehow facilitates or contributes to piracy by allowing consumers to stash the fruits of their use of file-trading ecosystems? 

 So “Pay $24.99/year and assuage your guilt for all those years of file-trading” could in fact be the subliminal message in Apple’s promotional efforts for iTunes Match? Does this signal a more rational approach to the online world for music labels and publishers?

Comments are closed