Amazon’s Cloud Service Is A) Legal B) Illegal? C) Probably Here To Stay

WSJ.com

Amazon doesn’t have paperwork from the music industry approving its new cloud music service. Does it need it?

“Not at all!” says the e-commerce giant.

“Maybe?” says the music industry. Adding: “We sure wish they would have asked.”

We’re probably going to dive deeper into the legal intricacies of music licensing and cloud storage in the next couple days. For now, we can say that:

  • Lots of people think a version of cloud-based storage and playback is OK, without licenses, under certain circumstances.
  • Some smart people (like former e-Music CEO David Pakman) say Amazon’s method in particular is just fine.
  • Others aren’t sure. A digital music distributor who sells music through Amazon, for instance, tells me his company’s contract only allows Amazon to deliver buyers a “permanent download”–defined as a copy of an MP3–to a “local storage device.” Does that cover the new service, which moves a copy of a file to a Web-based server? He doesn’t know. But it’s “annoying that a company would put their own partners in legal peril knowing the contentiousness of the music space,” he tells me.

Note that none of the big labels has actually come out and said, on the record, that Amazon is breaking the law. The complaints, on and off the record, are that Amazon hasn’t asked for permission.

Instead, Amazon has told the labels that it wants to use today’s launch as a starting point for a more advanced service, which would require licenses–and, presumably, a new revenue stream for the labels.

Amazon appears to be betting that the big music companies will end up coming around instead of going to court. If I had to bet, I’d wager that Amazon is right.

But the fact that Google is intent on launching its own cloud service, and that Apple may be right behind it, makes Amazon’s wager an even higher risk: If the labels don’t squawk about Amazon, how can they negotiate with Apple and Google?

Some housekeeping. Early this morning Amazon sent out a press release announcing the new service and asked if I had questions. I did, but didn’t hear back from the company until late today. For the record, here’s our mini Q&A:

Me: Does Amazon have any licensing agreements in place with any music labels or publishers? If so, which ones? If not, does Amazon intend to ask labels and publishers for licenses?

Amazon: We do not need a license to store music in Cloud Drive. The functionality of saving MP3s to Cloud Drive is the same as if a customer were to save their music to an external hard drive or even iTunes.

Me: Does Amazon intend to make music playback available via iOS devices, either via browser or app?

Amazon: We have nothing to announce today about being on iOS devices but we are always listening to customer feedback and will continue to evaluate expanding to other operating systems and devices as the opportunity allows.

Me: What are Amazon’s plans for video playback?

Amazon: We haven’t announced any plans for video playback. Currently, when you save a video to Cloud Drive, you can then view it using using the player associated with the file format–just as you would if you saved it to your computer’s hard drive.

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It’s also worth noting that mobile startup mSpot launched its own unlicensed cloud service last year (and has yet to be sued by the labels). I asked CEO Daren Tsui for this reaction to Amazon’s launch, and he sent me this statement:

Firstly, Amazon is offering a music in the cloud storage locker and player – and this is just one component of mSpot. We’ve had this feature out for almost a year, and in this time, we’ve learned a lot about our customers and what they really want. They want an experience that gives them lyrics with the song, info about the band, discography, etc. We’re gearing up to roll out our second phase very soon – including a new music discovery that will be unique to the market.

We’re in a multi-device world. While Amazon has done a decent job of their Web player – this is obviously the easiest half of the offering. We don’t think they can compete with us on mobile for the following reasons:
- We’re on both iPhone and Android; when people store their collections online, they don’t want to feel they’re locking down their choice of phone as well.
- Leading mobile carriers like Verizon, AT&T and Sprint havebeen offering our mobile entertainment services to millions of their subscribers for years, under our white label.
- Why? Our technology is truly optimized for the mobile, which has different requirements than the Web. We offer music playback over 2.5G and 3G that feels local to the handset, (which is very hard to do); faster syncing and streaming; continuous connectivity to your music, even when you don’t have a connection; choice in how much music to store on your phone – all are not just nice to have, they’re essential.
- We believe our proven industry experience on the mobile gives us a big edge over Amazon, or even Google or Apple.

On that note: We would welcome an opportunity to challenge Amazon’s service on mobile usability – any time.

We’ve been out for almost a year on Android, and since December for iPhone. We have a significant lead with over 1 million downloads on Android alone. People have already taken the time to upload their collections into our service, and they love it.

We think we have a better service and in order to remove any price barriers we’re going to offer 5 GB free storage. Going forward, we expect that the market for storage will be very commoditized and price-driven; but unique music services like mSpot will appeal more to music listeners looking for a complete experience on both Web and mobile.

March 29, 2011

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