Music only just the beginning of cloud services battle

Digital music launchpad for cloud vendors looking to gain lead in cloud-based media services, which industry analysts observe will include other rich media such as video in coming years.
Written by Jamie Yap, Contributor

The battle for a stake of the digital music market is currently heating up among cloud vendors, which industry analysts say marks only the beginning of the next wave of cloud-based commercial media services where the focus will shift to include video.

"Music is already a battleground [for cloud]", said Park Associates' analyst, Laura Allen Phillips, who noted that while cloud music has yet to reach a mass consumer audience, vendors currently see it as a large potential marketplace.

Consumers are more open to cloud-based delivery models for music than they are for other media types, and the number of connected mobile devices capable of streaming music is growing rapidly, Phillips explained in an e-mail interview.

Consumers today have more options with regard to the type of device and platform from which to listen and play music, including the desktop, portable MP3 player and smartphone. Hence, they are more open to new sources that can be tapped to store and access music, she added, noting that cloud music services will become more relevant to consumers.

Three tech bellwethers--Amazon, Google and Apple--have all unveiled their respective music cloud services within months of each other.

In comparison to current available music streaming services such as Rhapsody and Spotify, Phillips said such digital locker services enable users to store their existing music collection in the cloud and access it from multiple devices without have to separately load tracks into each and every device.

"People love having access to their own music, especially easy, organized, multi-device access," she added.

Stefan Haas, Asia-Pacific director of AMI-Partners, said cloud services for music and other media content are definitely triggering the next wave of consumer IT services.

Vendors, though, currently see the music cloud in particular as the "more attractive" market than other digital media because rising smartphone penetration and user subscriptions to music streaming services have pushed its consumption to "critical mass", Haas explained.

The combination of affordable wireless broadband and mobile data plans and high-speed Internet access, has made smartphones "full lifestyle platforms" that people use to manage both their professional and private, social lives--of which music is a part, he said.

Furthermore, technological advancements and the continuous evolution of their cloud services portfolio has enabled IT giants to offer cloud-based digital media services. They can also reach a level of economies of scale from which they can now open up their services to consumers without risking their profitability or putting a strain on service levels that consumers expect, he added.

Music just the beginning
According to Haas, competition in the cloud market is predominantly a platform game. And with the market for consumer cloud services still in its relatively early stages, he noted that no vendor wants to miss the opportunity to create the leading platform, gain significant market share and position itself as the leader for other media content services that will emerge over the next few years.

"As Facebook and Apple's iTunes have clearly demonstrated, the power of building a strong consumer platform in as little as a few months can create massive entry barriers that provide a very strong market position in a very attractive battleground for years," said the AMI analyst.

Hence, music in the cloud is just the "launching phase" of the next evolution of consumer technology and will be followed by additional media services such as video in the near future, he pointed out.

Phillips concurred, noting that Apple has been a dominant force in the digital music scene since the iPod. "iTunes has taught us that by being the go-to digital music source, it opens the door to providing other types of digital media," she said.

However, other players such as Amazon and Google are now looking for an opportunity to chip away at Apple's position in the cloud media space, she noted.

"Music may be the first commercial offering for a digital locker service, but other rich media will follow," Phillips remarked, adding that there will be a "hot contest" for cloud-based video services.

Myriam Boublil, head of communications and public affairs at Google Southeast Asia, noted that with Google Music Beta--currently available only in the U.S.--the company saw an "opportunity" to use its expertise in cloud services and capabilities of the Android mobile platform to improve users' experience with their music.

Licensing to iron out
Presently, only Apple has inked official licensing agreements with all four major record labels to offer its iCloud service. Google and Amazon both launched their respective services without any official licensing arrangements.

Elaborating, Boublil said: "Just as selling and using iPods or backup harddrives does not require a license, users have the right to store, manage and listen to their already-owned music through Music Beta by Google.

"We welcome and invite partnership with the music industry to develop additional features or new services that will generate income for artists and writers and for their labels and publishers," she added.

Phillips noted that such a move to "launch first and ask questions later" does not mean the companies involved will not eventually iron out licensing agreements with the record labels. The Park Associates analyst said cloud music services will indubitably have to navigate licensing and copyright issues.

"If record labels are able to successfully assert their rights, then not having an applicable licensing agreement could spell disaster for digital locker services," she said.

Haas agreed, pointing out while a free service model may be appealing to drive the number of subscriptions, service providers will "fail" if they do not find a way to monetize their service. This further underscores the need to gain support from major record labels, "critical" to help drive a sustainable number of subscribers, he said.

Google Beta is currently available for free, by invite-only, to users in the U.S, while Amazon's service is free for the first 5GB worth of music data. Apple provides its iCloud service for free only when the digital music tracks are purchased from iTunes, but users of its iTunes Match service will have to pay an annual fee of US$24.99. The service identifies and matches music the user already has and did not purchase via iTunes, and allows the user to access these tracks via the cloud.

Other challenges ahead
Phillips noted: "Cloud music in general faces the same challenge that all aspects of the digital music industry face--overcoming the idea that music is free."

On top of this, she added that industry players also need to tackle consumer awareness and willingness to trade traditional media ownership for an access-based model, which also presents technology issues when content is being streamed to a multitude of disparate devices.

Haas noted that data security and privacy are also critical issues associated with music cloud services. "If subscribers are not in a position to attribute a high level of trust to the service provider, the entire venture will not succeed," he said.

To have successful cloud music services, both analysts also underlined the need to provide consumers ease-of-use when accessing their music from anywhere and any device and platform, as well as to offer an attractive pricing model and integration with social media.

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