Amazon Cloud Drive, It’s Kinda Like a Big Deal – Part 1

Early last week Amazon launched a new online music service called Cloud Drive. At first glance Cloud Drive seems to be like any other online storage/backup system. Its features look very similar to Dropbox, a place where you can store your personal files for security and convenience as well as retrieve them from any internet connected computer. Amazon’s Cloud Drive doesn’t have the flashy OS integration system that Dropbox boasts for syncing folders, nor does it have any ability to share files between Cloud Drive Users. Doesn’t sound so exciting does it? Doesn’t sound so much different than Dropbox or Microsoft’s SkyDrive or the dozens of other competitors in the online personal file storage market. That’s exactly what Amazon is hoping it can argue when the music industry rains it’s fury on Amazon with it’s full force of legal challenges to what it sees as its biggest threat since Napster. But why…

Its more than just a “Digital Locker”

Unlike other “Digital Lockers” like Dropbox, Amazon has implemented one additional feature. This feature is that any mp3 or aac file (iTune’s default music file type) in your Cloud Drive can also be accessed from another web interface called the Cloud Player. The Cloud Player shows your music files in a friendlier way, showing you artist and album information, displaying album artwork, allowing you to arrange songs into playlists, as well as giving you the option to stream the files through a nifty embedded music player. Of course like the rest of the Cloud Drive you can also download your music files to whatever computer you’re on. Accompanying this web interface is an Android app that gives you most of the same functionality allowing you to stream music from your Cloud Drive straight to your mobile device.

Amazon has also added a few more perks like a free upgrade to 20GBs of space for a year when you buy any mp3 album from Amazon, plus the fact that any mp3’s bought from Amazon will be directly uploaded to you Cloud Drive without counting toward your storage limit. Keep in mind that while Amazon Mp3 is not nearly as popular as the iTunes Music Store (the largest music retailer, surpassing even Wal-Mart), it does have a comparably sized catalogue with over 14 million songs, and with its extremely competitive mp3 prices is poised to gain huge market-share if it can break the dominance of iPods by backing a wireless music delivery system to Android devices.

The Problem is Music Licensing

Companies like Apple have seen for some time now that the future of music is online streaming. With Youtube offering hundreds of thousands of songs for streaming, illegally of course, Google is also in development of a legal online music streaming service. Both Apple and Google have been in talks with the music industry for months on the details of such a services, like whether the model would be an “all you can listen” subscription based approach much like what Rhapsody tried to do, or whether users would purchase rights to stream individual songs. The key to any such arrangement however is the licesning agreement that splits the revenue from such services between the content owner, the music industry, and the provider, Apple or Google. The music industry is keen to work out an agreement that will open up this potentially lucrative new revenue stream, learning from some of their mistakes in licensing online downloads, and understanding that without their blessing no such service could move forward. That was until last week when Amazon released Cloud Drive without negotiating with the music industry at all.

The music industry sees this move as a direct assault on their assertion that they should get a cut out of every song that streams over the internet, a draconian view that is very much in line with past industry expectations. It also opens the door for Google and Apple to abandon talks with the major labels if they think they think they could take a similar route. It is more likely however that Apple and Google are putting heavy pressure on the labels to bring intellectual property suits against Amazon to remove the competitive edge Amazon has by not paying royalties, or better yet prevent Amazon from entering the music streaming market altogether. While my optimistic interpretation of Amazon’s move here is that they are challenging many of the music industry’s core presuppositions on how the next generation of online music distribution will roll out, it may also be the case that Amazon simply hopes that its aggressiveness will give them leverage when the major record labels come to try to settle for a percentage of the service’s revenue.

Either way a showdown seems inevitable and it may come down to who’s side the law is on, something that is far from clear. Check back for part two of this series where we’ll examine the legal issues at the crux of this whole situation