Cloud Music, Legal or Not?

Before you get too far into reading this, please know that I am not a lawyer. Nor did I spend the night at a Holiday Inn. I’m just a guy with a ton of media and want to find a way to access it all no matter what I’m using and no matter where I am.

Amazon Cloud Drive - Learn More — Store your files with us, what could possibly go wrong?

As most of you know, Amazon launched a music streaming service about two weeks ago. A combination of Cloud Drive to store your music and the Cloud Player to play those stored songs. Amazon lets you keep up to 5GB for free with paid options available all the way up to 1TB (not free). This stirred up a lot of tech commentary since they beat both Apple and Google who have been in “talks” with the music industry for what seems like forever over licensing agreements.

How did they manage to scoop both Apple AND Google?

Simple. They just didn’t ask. Kind of like it’s better to ask forgiveness than permission. Yeah, kinda like that. Only it’s different in that Amazon’s position is that they don’t need permission anyway. And I agree with that.

CNet’s Greg Sandoval writes: (emphasis mine)

In an interview with The New York Times on Monday, Amazon took a more defiant tone, at least with regard to music. “We don’t need a license to store music,” Craig Pape, director of music at Amazon, was quoted in the Times as saying. “The functionality is the same as an external hard drive.”

I think it’s important to note at this point how this service is different from most other “streaming” services out there right now. You have a couple of broad categories they fall into: “Radio-like” streaming, “leased” streaming, and “owned” streaming. Note that I just made up these terms, feel free to use them or make up your own terms for this stuff.

First, radio-like streaming

A prime example is Pandora [and I’m also going to lump broadcast radio in here just because, to me anyway, radio is just streaming over a different medium]. These guys take “their” music and send it to you. You have no (or not much) control over what gets played and when and how often. It’s also essentially free for the listener since you don’t pay any money out of pocket although you are subject to plenty of advertising. These guys pay some fee every time they play one of “their” songs that somebody else (you) listens to. These guys make money via advertising, and the music industry makes their money via the fee.

Leased streaming

I don’t know what to call this… rented, leased, borrowed, temporarily owned… Let’s stick with leased for now. Examples include Napster & Rhapsody who have been around forever as well as newcomers like Rdio and Spotify. These guys take “their” music and send it to you. You have complete control over what you want to hear and when and how often. It’s kinda like you own the music…. only you lose access to it once you stop paying them. I rather like this system as I pay a flat fee and get all you can eat music. These guys also pay some fee every time they play one of “their” songs that somebody else (you) listens to. These guys make their money usually by a subscription fee (Spotify has a free ad-based as well as subscription model), and again the music industry makes their money via the fee.

Owned streaming

Again, I struggle with a name for this. It’s music that you own whether you bought the CD 10 years ago or just downloaded the MP3 from a store like iTunes, Amazon, eMusic, Napster, Rhapsody, etc. The point being that it is “your” music (definition of “yours” is hazy according to music industry…). There are several programs such as AudioGalaxy and Subsonic (which I use) which install some software on your computer that let’s you stream your music *from your computer* to wherever you happen to be. For free. The only catch is you need the computer that holds you music to be on all the time and it has to be accessible to the internet past any annoying firewalls that may (or may not) be in the way. The costs involved are for the actual music, your storage (buying ever bigger hard drives), and your bandwidth (your ISP may or may not have caps and charge you). You, as the provider of this service, don’t make any money from this endeavor and probably just end up spending more money on top of whatever you initially spent for the music itself. The music industry makes money on the original music they sold you.

A couple of companies have cropped up recently in Mougg and mSpot along with the (in)famous MP3Tunes (I’m sure there are others) to take some of the hassle (if any) in streaming your own music to yourself. All of these companies let you upload your music to their cloud storage, and then play them back from wherever you want. They all give you a certain amount of storage for free, and then charge you a monthly or yearly fee for anything beyond that. Sound familiar? You betcha. The perk for you is you don’t need to leave your computer all the time, nor deal with any (possible) firewall conflicts. You also gain some redundancy (i.e. backup) in case your hard drive dies you don’t lose all your music. Put simply… it just works. The company makes money by charging you a monthly fee and the music industry STILL makes money on the original music they sold you.

Now, as far as I know, with the exception of MP3Tunes (that’s a whole ‘nother story) none of the guys in the Owned Streaming category have ever been sued, nor do they pay any licensing fees. Why? (again I’m not a lawyer) Because it is music YOU own and are playing back to YOURSELF.

Where does the Music Industry stand?

The industry loves to use the word “license”. They like to never admit they’ve actually “sold” you something, only that they have granted you a license for you to use for a fee and under certain restrictions. Something along the lines of (paraphrasing here) “We grant you permission to use this music as long as you don’t make any money off of it without paying us and you don’t share it over the internet, mmkay?” You probably didn’t know that because you never read the Terms of Service (TOS) or Terms of Use (TOU) on a CD box or all that fine print when you download your music (MP3/AAC). What it means is that the music industry is OK with it if you buy an album and listen to it. If you buy it and give it to your buddies, it’s not OK. If you buy it and play it for your buddies that you charged money to hear you play it (think radio) that’s not OK.

As far as I know the TOS/TOU don’t say you can’t use storage that isn’t directly attached to your machine (besides, then you’d have to define “attached” because it’s really just a long-ass cable from you to Amazon’s storage). The only thing the industry has to say is “Well, we didn’t say you *could* store it there, let’s negotiate some licensing terms”.

MG Siegler of TechCrunch says:

But the fundamental issue here remains: should storage in the cloud that you pay for really be different from your local hard drive? Think about that for a second. It’s actually pretty ridiculous that people think it should be different.

Currently, if you buy a song on iTunes or Amazon or elsewhere, you’re free to play that song as often as you wish on your machine. You’re also free to burn it onto a CD or transfer it to an MP3 player. I’m just not sure how moving it to the cloud is any different.

I’m guessing (again I’m not a lawyer) they don’t want these types of cases to go to a trial that they would either not win or not win clearly enough and potentially have a judge set a clarification/limit to their TOS/TOU that wouldn’t benefit them in the long run. Right now the whole licensing issue from streaming music is a really big vague mess that the music industry exploits by just saying “Where is my fee?”. That’s why these so-called negotiations among groups like Spotify, Apple, Google, etc take YEARS to come to a conclusion. What they don’t want (again I’m not a lawyer) is a clarification on when/where/how/why they actually CAN charge these streaming licensing fees… because then a dozen startups will rush the gates to exploit those newfound loopholes. We’ve already seen several (see above) that have gone through un-sued.

I think Amazon knew exactly what they were doing when they put this service out. They have lawyers too, and they knew where they could draw the line in the sand that the music industry could not cross.

What happens next is going to be really interesting

Get the popcorn. Pull up a chair. Sit back and watch the fireworks. Both Apple and Google are watching these two stand toe to toe and see who blinks first. If the music industry backs down, then JUST WATCH as Apple and Google do the same thing with their streaming service. Why should they pay if Amazon doesn’t have to? It’s only storage right?

That’s not to say that the music industry isn’t holding a doomsday device behind their back. They could go scorched-Earth style and tell Amazon they can’t sell their music anymore and only sell to those who would pay them fees for streaming (here is where Apple & Google are waiting in the wings to pick up the pieces). It’s possible Amazon doesn’t care because by that point they will have a boatload of people locked in streaming their own music (bought from Apple & Google) off of their servers. Maybe this is the sticking point for “negotiations”.

But I’ll tell you who the real winner is. For once, maybe – just maybe, it is the consumer (us).