How Amazon has outsmarted the music industry (and Apple)

Amazon just brought back the best of the late, lamented Lala service that Apple killed. Yes, the recording companies are whining already. I have no doubt that legal teams from all of the major record labels are plotting their lawsuits right now. But Amazon's position is incredibly strong. Here's why.
Written by Ed Bott, Senior Contributing Editor

1-April: Updated to include comment from Michael Robertson of MP3Tunes.

What Apple took away, Amazon has restored.

I'm talking, of course, about Lala, the pioneering digital music service that Apple purchased in December 2009 and shut down more than a year ago. The first thing Apple did, almost immediately after purchasing the company, was to disable its Music Mover feature, which allowed Lala members to upload their personal music collections to a cloud-based locker where they could play it from any web browser.

Yesterday, with the double-barreled launch of its Cloud Drive storage service and the tightly linked Cloud Player, Amazon brought that capability back to a mass audience. They've executed their strategy brilliantly, and they've painted the recording industry and their archrival Apple into a corner.

As far as I'm concerned, Amazon just moved the needle significantly on the music industry. Yes, the recording companies are whining already. I have no doubt that legal teams from all of the major record labels are in war-room mode right now. But their legal case is nonexistent. Here's what they'll find out if they try.

No sharing? No legal case.

Every analysis of the new Amazon services I've seen has brought up the example of the lawsuit against Michael Robertson's mp3tunes.com by EMI. Superficially, that service is similar to what Amazon is offering. But there's an absolutely crucial difference. Amazon allows you, personally, to upload your music files to a digital locker and then play them back through a browser or an Android app. By contrast, mp3tunes.com includes a full API that allows developers to "create cool apps and device access to the MP3tunes Locker."

That might sound awesome, but it arguably violates the license agreement for digital downloads. I've looked carefully at those agreements before. If you haven't read that post, it's worth going back for a revisit. All of the major online music providers, including Apple and Amazon, have been selling tracks and albums for years. Those agreements have been accepted by the major record labels without any challenge.

Here's what's in section 2.1 of the Amazon agreement (iTunes has similar terms):

Upon your payment of our fees for Digital Content, we grant you a non-exclusive, non-transferable right to use the Digital Content for your personal, non-commercial, entertainment use, subject to and in accordance with the Terms of Use. You may copy, store, transfer and burn the Digital Content only for your personal, non-commercial, entertainment use, subject to and in accordance with the Terms of Use. [emphasis added]

Amazon's new cloud services allow only personal, non-commercial use and don't allow any sharing. This identical language is found in the terms of service for both Cloud Drive and Cloud Player:

You agree not to use the Service in any other way, including to store, transfer or distribute files of or on behalf of third parties, for any form of file sharing, to operate your own file storage service or to resell any part of the Service.

You have to sign in with your personal Amazon account, where you can copy, store, and transfer your personal saved files. You can't give anyone else access. Again, per the terms of service:

You may not use a name, username or email address that you are not authorized to use or share your Amazon.com username and password with others for purposes of allowing others to use the Service through your account.

And Amazon hasn't made the mistake of allowing third-party apps to access those personal files, either, as mp3tunes.com has. Game, set, match.

But wait, it gets better…

Page 2: The cloud is just another disk -->

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There's another big trap waiting for the music industry as well. Wisely, Amazon has split its cloud services in two. Its Cloud Drive service is directly analogous to DropBox, Windows Live SkyDrive, and other online file services. Which leads to two inescapable, incontrovertible facts:

The cloud is just another disk. Today, you can copy music files to a flash drive, a writable CD, a shared network drive, or a different folder on your local PC. That activity clearly falls into the "copy, store, and transfer" activities permitted under the license agreement. Does the recording industry seriously want to argue that once you've downloaded a file it must remain in its original folder in perpetuity? I'd love to testify as an expert witness for the defense in that case.

Which leads to…

A digital music track is just another file. If I upload a digital music file to DropBox, have I violated a license agreement? Of course not. If I use an online backup service to mirror my hard drive to an online service, am I required to exclude digital music files from the backup? Don't make me laugh. Any record executive who tried to make the argument that you can't back up purchased files would be laughed out of court.

Amazon has already set the stage for that perfectly reasonable argument by including four default folders in Cloud Drive: Documents, Music, Pictures, and Videos. Yes, you can search for and upload your supported music files with a tool that is nearly identical to the late, lamented Lala Music Mover. But you can also manually upload other types of files as well. (And how long do you think it will be, by the way, before Cloud Drive is competing with DropBox?)

This, of course, puts Apple in an awkward position. If they try to outdo Amazon by adding features that go beyond this narrow set of capabilities, they risk running afoul of license agreements. If they support Amazon legally, they look like they're offering a me-too service and they validate Amazon's approach and its leadership role.

Ultimately, size and experience matter. Amazon has built a tremendous reputation for reliability and performance with its Amazon Web Services. (I 've used them for years to back up my digital photos and other personal files.) I have a tremendous amount of confidence in the company. I'm still angry at Apple for killing Lala and invalidating the time and energy I spent uploading my music files to that service. I know that whatever energy I expend in uploading my personal files to Amazon will not be wasted—Apple isn't going to be buying Amazon and killing Cloud Drive.

And finally, there's the privacy issue, which sent my ZDNet colleague Steven J. Vaughan-Nichols into a quasi-paranoid flight of fancy yesterday. I actually laughed out loud when I read his reference to the Amazon terms of service as "draconian privacy violations." I'm not worried about Amazon handing my files over to the RIAA—exactly the opposite, in fact. Amazon is one of only four companies in the world that have the money and the muscle to stand up to the music industry, and I expect a vigorous defense on their part.

Ironically, the alternative service that Vaughan-Nichols recommends, SoundCloud, has some terrible language in its terms of service:

SOUNDCLOUD reserves the right to block, remove or delete any Content, communications, postings, and/or other data or information if SOUNDCLOUD, in its own sole and unfettered discretion, has reason to believe that such Content and/or other data or information may infringe the rights of a third party, and in particular if SOUNDCLOUD deems such Content and/or other data to be … possibly in violation of a copyright, trademark, patent, trade secret, or other intellectual property right….

SOUNDCLOUD will terminate a user's access to its Services if, under appropriate circumstances, the user is determined to be a repeat infringer. A user is considered a repeat infringer if SOUNDCLOUD receives more than three (3) legitimate infringement notices for such user’s account or in any other reasonable case.

And it gets worse. According to one recent report, SoundCloud has recently implemented a "digital fingerprinting" technology, like the ones used by Google for YouTube, which they have already used to take down content based on complaints from the copyright owners.

I've been a happy Amazon customer for more than 16 years. They've proven by their actions that they deserve my trust, and I like what I see in both of these new cloud services. I'll stick with them, thank you very much.

Update: Via e-mail, Michael Robertson CEO of MP3Tunes, disagrees with my characterization of the differences between his company's service and the one Amazon offers:

MP3tunes doesn't allow ANY sharing. Never has. Everything is password protected. EXACTLY like Amazon. The entire premise of your article is wrong.

We do allow developer access but that doesn't mean there's sharing. In fact there are hundreds of hardware and software devices which connect to the MP3tunes cloud music service and not one allows sharing. This is because developers can't set access controls. That's set by MP3tunes and we require a username and password for every access.



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