Amazon's Third-Quarter Profit Down 73%, Stocks Drop
Amazon's Third-Quarter Profit Down 73%, Stocks Drop

The biggest question being asked about Amazon's new cloud music service is: "How did it beat Apple and Google to the punch?" The answer to some is: It didn't.

To say that Amazon beat Apple and Google is simply unfair, because the products those companies are working on are different from the one Amazon today launched -- which isn't much different from the product mSpot introduced last year. It's the most basic music locker service, one that simply stores copies of music in a locker that can be streamed to any computer via a Web browser, or to any Android-powered mobile phone via an app. mSpot's service is different only in that it has an app that also works with the iPhone.

Why did Amazon take this most basic step? The simple answer is: licensing. This is a legally cloudy area, but basically companies like Amazon and mSpot apparently don't feel they need to establish new licenses with labels and publishers simply for allowing customers to stream copies of songs they already bought to different devices.

Labels, however, disagree.

"We are disappointed that the locker service that Amazon is proposing is unlicensed by Sony Music," a Sony spokesperson said in a statement to Billboard.biz.

Amazon Director of Music Craig Pape told Billboard.biz in response: "We don't believe we need licenses to store the customers' files. We look at it the same way as if someone bought an external hard drive and copy files on there for backup."

In addition to being disappointed, labels we've talked to are also unimpressed with the Amazon cloud service.

"It's very uncompelling from a consumer standpoint," said a representative from one major label, noting that it takes an hour to upload just two albums. The same person said Google and Apple were "probably laughing" at Amazon for launching with something so basic.

"If they wanted to offer a third-rate service, they would have done so already," the person said, referring to Apple and Google. "If you want to do anything feature-rich, you have to have licenses."

As for Google and Apple, both companies are planning to launch some kind of streaming locker service. But how they do so and what other features are necessary make all the difference in the who-launches-first game.

Google doesn't have an existing music store like Amazon does. It still needs to go through all the licensing negotiations required to add that feature alone, and that's being complicated by the fact that it wants to add streaming access at sale as well.

As for Apple, sources say Apple has yet to fully decide what it plans to do in terms of a cloud music service. The spectrum of options runs the gamut from a simply store and stream service like what Amazon introduced today, or a "scan and match" service, or potentially some kind of subscription option.

Other features both could add that Amazon lacks are things like music recommendations, sharing music between users/friends, playlisting and more. Clearly, Google and Apple are playing a completely different game.

Presumably, Amazon launched the simplest product first because it needs all the momentum it can get as it prepares for even stiffer competition from Apple and Google in the near future.

Questions? Comments? Let us know: @billboardbiz

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