Amazon's Cloud Player gets a major-label upgrade

Cloud music is getting smarter - and may soon get more mainstream. On July 31 Amazon launched a fully licensed scan-and-match cloud music service, giving it the same features as Apple's cloud locker service, iTunes Match. But Amazon's service could soon reach a new segment of consumers. Sources tell Billboard that Amazon is working to launch a feature that will populate Cloud Player accounts with tracks from CDs purchased on Amazon.

For $25 per year, Cloud Player users can duplicate their music collection in the cloud without having to upload each file individually. (That price comes with 50 GB of storage.) Amazon secured licenses from all four major labels and more than 150 independent music companies in order to add the service.

Smarter means faster: Cloud Player will scan a user's iTunes and Windows Media libraries and match the songs to Amazon's catalog of 20 million tracks. Smarter means better sound, too: All matched songs, whether or not they were purchased or ripped from CDs, will be upgraded to 256 kbps audio quality. Tracks that users have already uploaded to Cloud Player will also be upgraded.

When The Cloud First Rolled In

Amazon first launched its cloud storage service and Cloud Player in March 2011. Both are integrated with Amazon's MP3 store so that song and album purchases can be immediately stored in Cloud Drive and later played with Cloud Player. Amazon purchases don't count against storage limits. Amazon gives consumers 5 GB of free storage space and charges for more.

But until recently, Cloud Drive has been more dumb than smart. Because Amazon didn't have licenses required for more robust features, music files had to be uploaded to Cloud Drive one at a time. Thus, uploading a catalog required both time and bandwidth. In contrast, iTunes Match can create a cloud-based duplicate of a person's music collection without the need to upload each file individually.

Amazon's launch of an unlicensed Cloud Drive created some resentment from labels that didn't want cloud storage to go unlicensed. But sources say it wasn't long before Amazon and rights owners started negotiations for the smarter service that launched July 31.

Now Amazon is planning to populate Cloud Player accounts with the tracks its customers purchase in the CD format. According to sources, Amazon wanted its customers' CD purchases to automatically populate their Cloud Player accounts just as MP3 purchases currently show up in a buyer's account. One source points to a fall launch.

Why Labels and Publishers Signed On

Rights owners appear eager for the new service. At least two major labels have already agreed to terms with Amazon to populate locker accounts with purchased CD tracks. As part of April's mechanical rate settlement for new business models, music publishers had already agreed to allow physical retailers to populate virtual lockers as long as there was a physical sale, according to David Israelite, president/CEO of the National Music ­Publishers' Assn.

"This agreement is the result of very productive negotiations that are ultimately very good for the consumer," he says.

Leveraging CD sales helps both Amazon and the music business. Opening up Cloud Player to CD buyers has the potential to bring digital music to an entirely new group of consumers. Given Amazon's CD market share and this technology's dramatic reduction in friction-automatic account population is far easier than ripping a CD once it arrives in the mail - this new feature is a sensible way to lure CD buyers into the cloud. It would also make the Cloud Player stand apart from iTunes Match, which leverages the popular iTunes store and media player, and Google Music, which lacks scan-and-match features.

Can The Cloud (and Kindle) Match iTunes?

Cloud Player has a steep hill to climb, however. Users of the iTunes desktop client can simply opt for iTunes Match, and although iPhone and iPad owners can use Cloud Drive there seems to be little chance of Apple users crossing over to Amazon. That leaves Android smartphones and tablets - including Amazon's own Kindle Fire tablet. On Android smartphones Amazon has to worry about Google's own music store and (unlicensed) storage service.

Amazon's digital products are inexorably linked to its consumer electronics, and Cloud Player's success could come down to the popularity of the Kindle Fire. Experts expect Amazon to launch another version of the tablet later this year. A greater abundance of apps will also help lure consumers to the Kindle Fire. Spotify and Cablevision both launched the Kindle Fire app on Aug. 7, and ABC News debuted on the platform in late July.

Tablets are popular for reading, viewing and listening to music. According to a recent study by ABI Research, 74% of tablet owners listen to music while reading, compared with 48% of smartphone owners. ABI also found that tablet owners spend more on e-commerce transactions than smartphone owners. The more people use Kindle Fire tablets to purchase and listen to music - and buy CDs - the more popular Cloud Player can become.