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Apple's New "Cloud Deal" With Warner Music

By Mahyar Hashemi, Published: April 22nd, 2011 4:04 PM CDT

Apple has an agreement with Warner Music Group to offer the record label's tracks on iTunes' upcoming cloud-music service, music industry sources said.

In the race to the cloud, Apple is apparently stepping on the gas. All Things Digital reported Thursday that Apple has signed two of the top four record companies and wrote that Apple content chief Eddy Cue was due to fly to New York (NYT) on Friday to try and finalize agreements with the two still unsigned labels.

It is unclear whether Warner was one of the two that had previously licensed Apple or whether the New York-based label inked an agreement on Friday. A Warner Music spokesperson declined to comment. An Apple representative was not immediately available.

Warner Music is the third-largest of the top four labels and home to such acts as Linkin Park, Flo Rida and Green Day. The other record companies are Universal Music Group, Sony Music Entertainment and EMI Music. At the same time as Apple makes the rounds at the labels, Google has grown frustrated and has told the labels that they are exploring the option of breaking into cloud music by striking partnerships with existing services, including Spotify, say sources with knowledge of the talks.

There's a lot of news leaking/flooding out about the land grab going on for cloud music so let us try and remember what all the fuss is about:

First, cloud music is supposed bring back riches to the record labels, stimulate music sales for iTunes and other online retailers and supply fans with added convenience.

The term "cloud" describes third-party computing. Apple and Google have discussed with the labels creating cloud services that would enable users to store their existing music libraries on the companies' servers. Consumers could then access their songs from anywhere they could connect to the Web. What we're really talking about here is the possibility that the company's could offer users life-time rights to their music. They wouldn't have to worry about an inoperable CD or a malfunctioning hard drive. The music would live forever in the cloud.

Neither Apple nor Google have spoken publicly that they are building such services but numerous news sites, including CNET, have reported that in addition to speaking to the top music labels about the cloud, they have also discussed launching cloud features for digital video with some of the Hollywood film studios.

The contest between Apple and Google is now for second place. Amazon stunned the recording industry last month by launching a cloud service for music, video, e-books and other digital media. But Amazon's service is restricted because the retailer decided to launch without acquiring licenses. That meant it couldn't offer a wide range of features or else risk violating copyright laws.

For instance, Amazon might have made the service more efficient had it licensed the right to make single copies of the labels' songs and then deliver those copies to users. They could have scanned a users' hard drives to make sure they owned, say, "Boulevard of Broken Dreams" and then streamed the same copy of the song to all the owners. Without the licenses, Amazon must store possibly millions of copies of "Boulevard."

The features that Google and Apple are working on are supposed to be much richer than Amazon's. One surprise about the competition by these Internet titans is that Google is having a hard time licensing music. All the industry sources I have say that top labels were practically hyperventilating at the possibility that Google would make a foray into the space and the sector would finally have a deep-pocketed iTunes competitor, one with the formidable hardware and software, one-two punch.

Related: SNE

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