Business Matters: Five Reasons Why Dropbox's Acquisition of Audiogalaxy Could Be a Big Deal

Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions

Business Matters: If Big Radio Had Pandora's Royalty Rate, It Would Owe Billions

Google, Amazon and Apple may soon get more competition in the cloud music space. Audiogalaxy, a second-tier music hosting and streaming service, announced this week it has been acquired by file hosting service Dropbox.

Started in 1998 as a file-sharing service, the most recent incarnation of Audiogalaxy was similar to the unlicensed, first version of Amazon's Cloud Player. Songs were uploaded individually to a user's account and streamed to a variety of connected devices. For U.S. users, Audiogalaxy offered a feature called "mixes" that streamed continuous music similar to Internet radio (the mixes feature will cease working on December 31).

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A post at Audiogalaxy's blog suggested Dropbox acquired the technology rather than the Audioglaxy brand. Adding Audiogalaxy's underlying technology to the popular Dropbox service could actually end up being a big deal. Here are five reasons to keep an eye out for a Dropbox music service:

1. Dropbox is a large, high-revenue business with over 100 million users and revenue reported at $240 million in 2011. It has the ability to invest in a licensed, scan-and-match music locker if it so chooses. A licensed music locker - Audiogalaxy had been unlicensed thus far - would return some value to rights holders.

2. Dropbox creates excellent products that are (a) easy to use and (b) can be accessed on multiple devices. Both are traits needed in a successful digital music service. It stands to reason a Dropbox music service would share the same product characteristics as the Dropbox file hosting service that has become so popular.

3. The acquisition creates immediate synergies. Audiogalaxy - or whatever the technology will become - gets access to Dropbox's large customer base. Better yet, many of these customers are already storing music files.

4. Dropbox specializes in the cloud. The company is basically filled with engineers tasked with helping people store items in the cloud and access them remotely. Some people might dismiss the Dropbox model by saying it's a service rather than a company. Maybe so, but Dropbox has the advantage of focusing on one thing -- the cloud -- rather than multiple products or services at once.

5. The deal makes Dropbox's fight against the big cloud competitors more interesting. Dropbox certainly has a lot of competition in the cloud storage space. Apple, Google and Amazon both have licensed, scan-and-match music lockers to go along with their cloud storage services. Microsoft also offers a cloud storage service, SkyDrive. Music could be one way for a smaller competitor to play against the giants.