Amazon Introducing 'AutoRip' -- Automatically Stores CD Purchases in Cloud

Amazon today will re-jumpstart the subscription cloud service business model for the music industry by adding digital copies of CD purchases for its customers to their locker.

Amazon customers possessing a cloud account who already have MP3 purchases from the store automatically deposited in the cloud will enjoy the same service for CD purchases. What's more, the Amazon "AutoRip" service is not only for CD purchases going forward, but for any CD a customer bought going back 15 years since the Seattle-based online store first opened.

This development was first reported by Billboard.biz in August of last year.

Currently, Amazon has agreements with all the major labels and many independent labels to the tune of 50,000 CD titles being eligible for "AutoRip," which will also have an international element as it will be available in some Amazon stores outside the U.S.

The Amazon Cloud Player, which can be accessed by up to 10 devices per account, is offered to customers via an introductory offer that provides customers who open an account to store up to 250 songs for free; and a $25 a year to store up to 250,000 songs for songs ripped from CDs; MP3 purchases songs storage is free to Amazon customers.

While Amazon initially launched its locker service in March 2011, it angered record labels and publishers by offering the cloud storage capabilities without getting the proper licenses. But eventually the music labels and publishers let it slide because Amazon is such a big customer and the industry were reassured that the merchant would negotiate and pay for the proper licensing for a scan-and-match service.

This time, Amazon was able to convince music publishers to give them licensing based on the settlement between the record labels, music publishers and digital music services that created five new business models, including a cloud storage service, which are still pending the approval of the Copyright Royalty Board.

According to sources, Amazon is already paying 12% of subscription revenue or 20.65% of total content cost or 17 cents per subscriber per month, whichever figure is greater, for the locker service, which in its simplest formula means that publishers get 12% of revenue, labels 58% of revenue and Amazon, a 30 % profit margin.

But what of the introductory offer of storing 250 songs for free? While there may be an agreement on how to handle that -- some sources say Amazon will pay .005 Cents, or half a cent per song up to 250 songs per user for the free subscription could tier -- while others say Amazon won't pay anything at all, whatever the decision, Amazon has the benefit of the doubt because of its history as a top account.

Amazon declined to discuss terms at all. But they were willing to talk about the new service.

"This service is truly unique to Amazon," says the store's VP of worldwide digital music Steve Boom. "We are the only guys selling CDs and digital downloads that can also be stored in a robust cloud service."

While both iTunes and Google offer cloud services, they only sell MP3 downloads, not CDs. So if a customer has an iTunes cloud and CDs stores on their computer, the iTunes cloud service will scan and match the CDs and place those songs in the cloud -- but so will the Amazon Cloud service, which began that service in July 2012. Amazon is one of the four largest sellers of CDs in the U.S., along with Walmart, Target and Best Buy.

"Amazon is bringing the digital cloud service to physical music owners," Boom noted. "This is one of the things that we are doing for our customers: we are bringing more value to the music they already own."

Boom says that the merchant will send an e-mail to all of its customers who have bought CDs since the store opened. The free introductory offer could persuade people to sign up for the Cloud Player, and once they start playing their music on their smart phones, might be induced to moved to a premium subscription eventually, say label executives familiar with Amazon plans.