Apple Is Called Poised to Offer ‘Cloud’ Music

Apple has reportedly signed contracts with labels that represent artists
like Bruce Springsteen.
Apple has entered the final stages of negotiations with the major record
labels and music publishers for a service that will allow people to upload
and store their music on the Web and listen to it on smartphones, tablets or
computers — so-called cloud-based music.

Amazon and Google introduced similar services weeks earlier. Apple's
service, though, is expected to be easier to use, and to find a ready market
in the 200 million people who have iTunes accounts.

The company has signed contracts with Sony Music Entertainment, EMI and the
Warner Music Group to license those labels' recordings for its new service.
It is still negotiating with Universal Music Group, the largest of the four
labels, but that deal could be finished as early as next week, according to
several people briefed on the talks who spoke on condition of anonymity
because the deals were private.

Analysts said Apple might announce the new service as early as next month,
when it hosts its annual developer conference in San Francisco.

Apple declined to comment, as did the record labels.

Like Amazon's Cloud Drive and Google's Music Beta, Apple's new service
will provide access to remote servers that can store digital music files and
stream them to users' computers, smartphones and other devices. But since
Amazon and Google did not get licenses from record companies, their music
programs are essentially storage systems, which require users to upload the
music they already own before they can play it, a process that can take
hours.

Having label licenses would allow Apple to design a more elaborate and
efficient system. For instance, Apple's service is expected to be able to
scan people's iTunes libraries and match their songs to a single master
collection on the company's servers, eliminating long upload times.

Apple might also introduce features like sharing songs with friends, and the
ability to listen to a song on different devices without having to connect
them first to a computer.

"For most of us who have multiple devices, it is annoying to have to tether
them to our computer every time we buy a new song," said Dave Goldberg, who
in 1994 founded Launch Media, an online music start-up that was later bought
by Yahoo.

Although Apple has nearly finished its talks with the labels, it still must
obtain licenses from music publishers, who control the copyrights for a song's underlying composition, as opposed to recordings, and who also represent
songwriters. Most of the major publishers are owned by the labels but are
operated separately, and their permission is essential to offer the more
advanced features.

In 2003 Apple opened its iTunes store, which transformed the music business,
selling more than 10 billion songs. Now the music industry is eagerly
awaiting Apple's entry into cloud-based music. The company has been
expected to release a cloud service since at least 2009, when it reportedly
spent $80 million to buy Lala, a start-up that allowed users to play music
they already owned from the Web. Shortly after the deal closed, however,
Apple shut down Lala.

Apple also built a large data center in North Carolina, which company
officials said would handle music and other services.

The exact timing of the announcement of the service may depend on when Apple
closes the publishing deals and whether the technology is ready to go.

"Apple doesn't announce anything until it is ready," said Tim Bajarin, an
analyst with Creative Strategies, adding that Apple could also wait until
next fall. "We know that the data center is online, but we don't know
whether the software components and the service pieces will be ready by next
month."

Analysts also said Apple was likely to pass on the cost of the new contracts
with the music labels and publishers to consumers by charging for the
streaming service. While some consumers may balk at having to pay extra to
listen to music they already own, many will pay for convenience, they
predicted. And the cloud music service could be somehow integrated with a
new version of MobileMe, Apple's online subscription service that offers
storage and other features. Apple is widely believed to be working on a
revamped version of MobileMe, which has long been considered a flop.

"I don't think it is something they will have to give away for free, at
least initially," said Gene Munster, an analyst with Piper Jaffray. Mr.
Munster said the service could be bundled with MobileMe.