the golden cloud?

Peter Tschmuck wrote a brilliant piece on cloud music services on his blog, triggered by recent launches of Amazon’s and Google’s music locker services. He is asking the crucial question whether this might prove the main business models of the future music industry or just be another bubble to burst with the next upgrade?

Like most of the technologies the music industry claims to be ‘new threats’ aren’t new at all. Same for cloud services, who’s first version was a music locker service by mp3.com some 15 years ago.

Right, a music locker is no cloud, but, let’s call it the elder brother. A music locker is (in simple words) a web-based backup drive. You copy your files to a place outside your computer and can access your own files from any other device and location.

A cloud delivers the same effect but has a different approach: A scan-and-match-service, where your digital data libraries are scanned and are matched with a database on a centralized service.

Other than a locker – which is a legal (digital) private copy, a cloud thingy requires support of the copyright holders. You can imagine where this will take us – cloud based services are far more effective in terms of wire capacity, connectivity, server space, time, and offer less grey zones for illegal content. But to avoid negotiations with rights holders, cloud services are rather labeled ‘passive’ locker services or alike.

Why?

The main concern of the right holders is to prevent users to share their music in the cloud like in P2P file sharing systems. To prevent this, they demand access only from one or a limited number of devices, not from any (which is the idea behind cloud services). But their main demand is to limit the number of possible downloads per user, to restrict downloading to one (emergency) copy only in case your original got lost or deleted. All further downloads would be forbidden. And this kind of makes a cloud service obsolete and would only reduce required server space for providers.

Another pending threat is seen in the (yet a little far fetched) option to open many, many, many music accounts in order to distribute or even sell the extra accounts (???). To prevent this a central cloud service authority, which would administer all assignments should be installed, or at least identities should be uniquely tied to a valid credit card (bye bye young clients) or some other verified identity.

Labels demand that online music retailers embed personal purchase information in each song sold – a kind of digital receipt. All music tracks without a proof of purchase would be assumed to be unauthorized and not accepted into any cloud service. But what would I do with all those songs I copied from CDs I bought?

Let’s talk money.

What could be ways to monetize these services better than downloads and streaming. Locker services pay no licences and thus are no business model.

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, mechanical and ephemeral licenses. EMI and Warner agreed but UMG and Sony demanded 60% (instead of 58%).

Google initially offered the indie record label sector a 53% slice of the revenue cake, which was declined by the indies.

I mean a 70% / 53% share for a digital product sounds not too bad, does it? Especially when distributed by Google or Amazon. And we’re NOT talking about music sales only, but revenues from renting server space, from premium subscriptions and from advertising!

The other option would be rights holders maintain their policy and there is no deal, means no cloud service but locker services instead. This would result in 0% share and throw the music industry back onto the existing revenues out of downloads and streaming.

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