Apple to Unveil iCloud at WWDC on Monday
Apple to Unveil iCloud at WWDC on Monday

UPDATE: Reports surfaced today (May 22) that Apple has come to terms with Sony Music Entertainment for it's impending cloud service, according to Bloomberg News. The deal would make Sony the third major label after Warner and EMI to sign licensing deals with Apple leaving only Universal Music Group to work out terms.

If the reports are true, Apple has locked in licensing deals with two of the four major labels for its long-rumored cloud music service. According to CNET, EMI is the latest to officially sign on, joining Warner Music Group, which reportedly finalized agreements with Apple last month. And deals with Universal Music Group and Sony Music Entertainment are "close."

A Sony spokesman declined to comment, while representatives from the other majors were not immediately reachable. Apple also declined to comment.

If true, that would put Apple well on track to unveil some kind of cloud service at its June 6 developers conference. Exactly what will be launched remains an active point of speculation, but the assumption is that it will be another music locker that allows customers to store music on Apple's servers, to be streamed to any Web-connected device.

What would set Apple's locker apart from the others already launched by Google and Amazon are its label deals. Licenses mean Apple can offer a scan-and-match service, which would let users stream all songs from a common library in the cloud rather than upload their tracks to individual lockers. This not only puts less work on the user, but also would allow Apple to offer additional services, such as recommending music users don't already own or possibly share tracks with friends.

This would immediately set up Apple's cloud service as the best of the bunch, hobbling what the Wall Street Journal's Walt Mossberg called the "rudimentary" cloud services offered by Google and Amazon.

So why is Apple able to broker licensing deals with the major labels while the others couldn't? Simple. Apple is the largest music retailer in the world, in any format. That has several ramifications:

First, iTunes has already proved its usefulness and effectiveness, and so the labels are far more open when Apple has new ideas. This eases the upfront fee requirement typically demanded from other digital music services. Those upfront fees are meant to protect the labels when entering experimental deals. Deals with Apple are hardly considered experimental.

Second, labels want to protect the iTunes ecosystem that has developed. The notion that the labels are unhappy with Apple's iron grip on the market is overplayed in the tech press. Labels don't want a competing service to harm Apple, they want a competing service that can attract new customers to the digital music fold that Apple so far has not already acquired.

This is an industry designed to protect what it has. Digital sales may be flattening, but labels would much rather protect those sales level than risk lowering them further by licensing a service that could potential cannibalize the status quo.

Finally, licensing Apple puts pressure on Amazon and Google to come to terms, as they now have an inferior product that can only be improved by striking label deals. There is some speculation that this tack somehow dooms Amazon and Google to playing second-fiddle to Apple yet again in the music space. The idea that Amazon and Google (by launching too early with less sophisticated services) or the labels (by providing it with licenses while denying deals with others) are somehow setting Apple to dominate the cloud music market yet again is a bit silly. Apple was going to dominate it regardless.

Apple already is the king of the digital music universe. The vast majority of iTunes users have no idea what Amazon and Google launched, and those outside the music tech press echo chamber don't even know if Apple has any plans to launch something similar.

Even if Amazon and Google had scored licenses and launched before Apple, it's hard to see how that would have changed anything.