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There's music in the clouds and maybe in the courts
June 6, 2011, Monday
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WITH the new Cloud Drive and Cloud Player, Amazon.com is taking media management virtual, allowing consumers to store their music and other content remotely on Amazon's servers ("in the cloud," as it is known) and deliver it on demand to computers, tablets and smartphones.
The move highlights what is expected to be a mounting battle to provide consumers with online storage and management options for their digital content collections, as industry analysts expect Apple and other companies to launch similar music-related "locker" services.
In fact, on May 10, Google launched a cloud music service called Music Beta. Like Amazon's effort, Google is looking to manage music libraries and deliver them through the cloud.
"There's no question that the proliferation of devices is making the ability to access your content from the cloud a big deal," Wharton management professor David Hsu says. "This will go beyond music."
Amazon's Cloud Drive is a storage service that allows consumers to save up to 5GB of documents, music or other content for free.
To get more space, customers can pay about US$1 more per gigabyte per year, although anyone who buys an MP3 album from Amazon gets 20GB for free (a twist that may help Amazon boost its relatively weak digital music sales). Using the Cloud Player, users who store their music with Amazon can access their tunes from any Android mobile device and from PC and Apple computers.
Google's Music Beta also works on computers and Android-powered gadgets, and allows customers to upload up to 20,000 songs.
The service will be free initially and available by invitation only to select US customers.
The efforts stand in contrast to a streaming service such as Pandora or Spotify, with which consumers can listen to music from anywhere, but not songs from their own collections. And unlike an external hard drive or USB thumb drive, users do not have to carry an extra gadget to sync with their computers, phones or MP3 players. "Amazon is trying to change music consumption habits," Wharton marketing professor Peter Fader notes.
Many in the music industry, however, take a dim view of Amazon's new Cloud services, arguing that the Internet giant has failed to secure licensing rights to store and replay the tunes.
But leadership at Amazon counters that the company does not need to license music stored by users who already own it.
In a New York Times article, Craig Pape, director of music at Amazon, compared the Cloud Drive and Player to an external hard drive.
A representative from Sony Music, however, told the Wall Street Journal that the company is disappointed that Amazon is promoting the service without securing licenses from record companies and movie studios.
Legal problems
Andrea Matwyshyn, a legal studies and business ethics professor at Wharton, says moving content to the cloud "is the most natural model for music use." "Amazon's model is a logical evolution for consumers who want to listen to music at home, at work and anywhere." Ultimately, how cloud music is licensed and played may wind up being settled in court, she adds.
Amazon's move raises a host of questions: Will the Cloud Drive and Cloud Player boost Amazon's standing in the digital music market and allow it to better compete with Apple's iTunes, which dominates?
Does the company's move to stream content to consumers require music to be licensed?
How do the Cloud Drive and Player affect the big picture for Amazon?
It is unclear whether Amazon's move to the cloud will boost the company's market share for music sales. Apple dominates digital downloads and is the largest music retailer overall since eclipsing Walmart in 2008. According to Nielsen Soundscan, Apple has 26.7 percent of the music market. Amazon has a 7.1 percent share - including 1.3 percent from sales of MP3s.
"The Amazon initiative is interesting," notes Dan Levinthal, a Wharton management professor. "It both leverages their enormous infrastructure for cloud computing through the Amazon web services unit, which sells computing power to businesses and allows them to effectively personalize their role as a distributor."
Fader agrees, noting that "Amazon is carving a path and legitimizing music as a cloud service. It is only a matter of time before the cloud becomes the primary way to store and consume music."
First mover
But a first mover rarely runs away with a market - Amazon may just be paving the way for digital music leader Apple to enter the cloud arena, he adds. "Apple doesn't have the infrastructure, but has the brand that transcends product attributes."
According to Karl Ulrich, a Wharton entrepreneurship and e-commerce professor, entering a market later, but stronger, would be following a familiar path for Apple.
"Google was a late entrant in search. Apple was a late entrant in mobile phones. Moving first probably does not offer Amazon a substantial advantage," he says. "Others can readily observe how consumers are reacting to Amazon's service and can then react accordingly. In effect, first movers conduct market research from which the followers benefit."
David Pakman, a partner at venture capital firm Venrock, predicts that usage of Amazon's cloud music and storage effort will likely "be limited to its existing customers."
Pakman does not expect Amazon to improve its music market share dramatically. Pakman co-founded MyPlay, a digital music locker service back in 1999 and was also CEO of eMusic, an online digital music vendor.
(This is adapted from an article from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://bit.ly/kzTgkY)
The move highlights what is expected to be a mounting battle to provide consumers with online storage and management options for their digital content collections, as industry analysts expect Apple and other companies to launch similar music-related "locker" services.
In fact, on May 10, Google launched a cloud music service called Music Beta. Like Amazon's effort, Google is looking to manage music libraries and deliver them through the cloud.
"There's no question that the proliferation of devices is making the ability to access your content from the cloud a big deal," Wharton management professor David Hsu says. "This will go beyond music."
Amazon's Cloud Drive is a storage service that allows consumers to save up to 5GB of documents, music or other content for free.
To get more space, customers can pay about US$1 more per gigabyte per year, although anyone who buys an MP3 album from Amazon gets 20GB for free (a twist that may help Amazon boost its relatively weak digital music sales). Using the Cloud Player, users who store their music with Amazon can access their tunes from any Android mobile device and from PC and Apple computers.
Google's Music Beta also works on computers and Android-powered gadgets, and allows customers to upload up to 20,000 songs.
The service will be free initially and available by invitation only to select US customers.
The efforts stand in contrast to a streaming service such as Pandora or Spotify, with which consumers can listen to music from anywhere, but not songs from their own collections. And unlike an external hard drive or USB thumb drive, users do not have to carry an extra gadget to sync with their computers, phones or MP3 players. "Amazon is trying to change music consumption habits," Wharton marketing professor Peter Fader notes.
Many in the music industry, however, take a dim view of Amazon's new Cloud services, arguing that the Internet giant has failed to secure licensing rights to store and replay the tunes.
But leadership at Amazon counters that the company does not need to license music stored by users who already own it.
In a New York Times article, Craig Pape, director of music at Amazon, compared the Cloud Drive and Player to an external hard drive.
A representative from Sony Music, however, told the Wall Street Journal that the company is disappointed that Amazon is promoting the service without securing licenses from record companies and movie studios.
Legal problems
Andrea Matwyshyn, a legal studies and business ethics professor at Wharton, says moving content to the cloud "is the most natural model for music use." "Amazon's model is a logical evolution for consumers who want to listen to music at home, at work and anywhere." Ultimately, how cloud music is licensed and played may wind up being settled in court, she adds.
Amazon's move raises a host of questions: Will the Cloud Drive and Cloud Player boost Amazon's standing in the digital music market and allow it to better compete with Apple's iTunes, which dominates?
Does the company's move to stream content to consumers require music to be licensed?
How do the Cloud Drive and Player affect the big picture for Amazon?
It is unclear whether Amazon's move to the cloud will boost the company's market share for music sales. Apple dominates digital downloads and is the largest music retailer overall since eclipsing Walmart in 2008. According to Nielsen Soundscan, Apple has 26.7 percent of the music market. Amazon has a 7.1 percent share - including 1.3 percent from sales of MP3s.
"The Amazon initiative is interesting," notes Dan Levinthal, a Wharton management professor. "It both leverages their enormous infrastructure for cloud computing through the Amazon web services unit, which sells computing power to businesses and allows them to effectively personalize their role as a distributor."
Fader agrees, noting that "Amazon is carving a path and legitimizing music as a cloud service. It is only a matter of time before the cloud becomes the primary way to store and consume music."
First mover
But a first mover rarely runs away with a market - Amazon may just be paving the way for digital music leader Apple to enter the cloud arena, he adds. "Apple doesn't have the infrastructure, but has the brand that transcends product attributes."
According to Karl Ulrich, a Wharton entrepreneurship and e-commerce professor, entering a market later, but stronger, would be following a familiar path for Apple.
"Google was a late entrant in search. Apple was a late entrant in mobile phones. Moving first probably does not offer Amazon a substantial advantage," he says. "Others can readily observe how consumers are reacting to Amazon's service and can then react accordingly. In effect, first movers conduct market research from which the followers benefit."
David Pakman, a partner at venture capital firm Venrock, predicts that usage of Amazon's cloud music and storage effort will likely "be limited to its existing customers."
Pakman does not expect Amazon to improve its music market share dramatically. Pakman co-founded MyPlay, a digital music locker service back in 1999 and was also CEO of eMusic, an online digital music vendor.
(This is adapted from an article from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://bit.ly/kzTgkY)
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