Music Industry Will Force Licenses on Amazon Cloud Player — or Else

Amazon's decision to launch its new Cloud Player without securing additional music licenses has been described as a "bold move" by many observers. It takes serious guts for Amazon to simply declare that it doesn't need licenses -- especially when even casual observers know the music industry thinks otherwise.

Still, this isn't a one-dimensional issue, and the law has yet to deal much with services like Amazon's. Record companies fantasize about huge revenues from streaming services, and they fear digital lockers like the plague.

'The word streaming and the word download are nowhere in copyright law' -- MP3tunes' CEO Michael RobertsonIf the record labels don't come to a licensing agreement with Amazon soon, they will either be forced to take legal action or implicitly allow other music companies to ditch cloud licenses too.

Amazon vs. the music industry

Amazon launched two new services, Cloud Drive and Cloud Player, earlier this week. U.S. Amazon customers can get free online storage from Amazon to use for whatever they please, but users are heavily encouraged to upload their local music libraries. All Amazon MP3 purchases are automatically synced to the user's Cloud Drive without counting against the quota, too.

Once the music is copied to the remote drive, users can then use the Cloud Player Android or Web app to stream the music to any compatible device or browser, even if the files themselves had not been synced there.
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Both Apple and Google are expected to launch very similar services in the future, but neither has made an announcement. Google's music service is rumored to offer both music downloads and streams to go with its own digital locker -- the service would scan a user's computer and automatically add any tracks that Google has licensed to that user's online locker.

Apple's may involve unlimited music redownloads and streams to iOS devices as part of a MobileMe revamp, and Apple is currently believed to be in talks with the Big Four music labels -- Sony Music, Universal Music Group (UMG), Warner Music Group (WMG) and EMI -- to make it happen.

If Apple and Google are dutifully trying to hammer out licensing deals, why did Amazon go ahead and launch Cloud Player without them?

Amazon argues that Cloud Drive and Cloud Player are just services that let users upload and play back their own music, just like "any number of existing media management applications." After all, licenses shouldn't be necessary for users to play their own music, right? The labels seem to disagree -- they expressed shock following Amazon's announcement, with a Sony Music representative implying that the company was looking into legal options.

But are licenses required for users to play back music that they have legally purchased, even if that playback is coming from "the cloud?"

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Uncharted territory

"The word 'streaming' and the word 'download' are nowhere in copyright law," MP3tunes' CEO Michael Robertson told Ars.

"It may be a very logical, common sense position, but all that matters is what the law says. Can you store your own music? Can you listen from anywhere? What if your wife or kids want to listen to it? All those things are completely uncharted territory."

As long as media companies think of file lockers as piracy devices, they will be at war with them.Robertson would know, as his company has been involved in a legal battle with EMI for more than three years over largely the same issues. (Robertson originally hails from MP3.com, which was successfully sued by Universal Music Group in 2000. The case resulted in the largest copyright damages verdict ever awarded up until that point.)

His current company allows users to upload music to the site's lockers, allowing them to listen to that music anywhere they can access the site. If you think that sounds a lot like Amazon Cloud Player, you'd be right -- the services offer many of the same features -- though Robertson pointed out that Amazon may actually be in an even tighter spot than MP3tunes when it comes to licensing.

"Unlike us, Amazon is also a music retailer," Robertson said. "This means they've entered into a license with all the major record labels to sell music, but these licenses have certain restrictions -- things Amazon can and can't do, and things they've agreed they won't do."

Robertson went on to explain that Amazon has likely agreed not to allow, for example, music redownloads after a user has purchased a song (a complaint that often crops up about music purchased from the iTunes Store as well).

"Why is that? Because that's what their contracts say. They're specifically prohibited from allowing people to download multiple times, but that's what Amazon is doing with its new setup. This gives the record labels a new area of attack that goes beyond the lawsuit with MP3tunes."

Intellectual property lawyer and This Week in Law host Denise Howell generally agrees with Robertson's assessment. "[Amazon's] response as quoted in your piece could have been asserted by MP3.com, Kaleidescape, Slingbox, and of course Robertson's new MP3tunes," Howell told Ars. "All were or have been wrapped up in years of litigation over the same essential issue: to what extent is it permissible to allow consumers to time, place and/or device-shift 'their' media?"

Howell pointed out that many self-identified geeks have been doing something similar on their own for ages. "Of course, not many music customers have the technical chops to achieve that perfect marriage of Lacie drive and Sonos." But she says it's not worth the recording industry's time to go after the little guys.

Amazon, however, is a different story, and it could take years of legal skirmishes before figuring out whether Amazon's bold statement is correct.

"It took the U.S. Supreme Court to confirm, in the face of our copyright laws and the protections they give content owners, that personal video recorders were legal," Howell said. "Though the legality of cloud storage and remote access to items already purchased make intuitive sense, I suspect it will take similarly definitive and hard-fought judicial pronouncements to bullet-proof such a business model without specific licensing in place."

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Apple and Google are watching

There are other reasons why the music industry will either push Amazon for new licenses or take the legal route, and their names rhyme with Schmapple and Croogle.

'It took the U.S. Supreme Court to confirm, in the face of our copyright laws and the protections they give content owners, that personal video recorders were legal.' "If Amazon can launch its service with no licenses, then Apple and Google would be fools to get licenses because they'd be at a cost disadvantage," Robertson said. "If the labels do nothing, they're basically inviting Google and Apple to follow the same strategy."

After all, Apple is still the top music seller in the United States (physical media included) and currently owns 66 percent of the online music market, according to NPD's latest numbers.

The sheer amount of music revenues that pass through Apple's hands to the record labels every year is no joke, and when finally Apple launches its own digital locker/streaming service, the music industry will definitely want an additional cut. Google, while not quite as big in music, is at least a big name -- the record companies wouldn't want to miss out on that either.

As it turns out, Amazon may not be so committed to its "read my lips: no new taxes licenses!" stance after all. According to "people familiar with the matter" speaking to the Wall Street Journal, Amazon is "aggressively" working on licensing deals with record labels after all, with a bonus goal of "minimizing bad blood" after Tuesday's move.

However, those licenses may be for a slightly different purpose. Amazon is reportedly considering a feature that would let users upload their music libraries and stream that music to friends, but only if a particular song is also in Amazon's database of songs-acceptable-to-stream-to-others.

"Songs not recognized by the system would still be uploaded and maintained as unique copies," writes the Journal, which claims that Amazon is trying to wrap up such negotiations in a matter of weeks.

(Howell takes issue with the Journal's assertion that "intellectual property experts agree" Amazon's situatio is covered by the Supreme Court's 2009 decision on Cablevision -- it said that Cablevision DVRs could make a copy to centralized servers as long as a local copy remained on the customer's device.

"Here, users will be uploading files they downloaded per Amazon's MP3 music service to S3, then accessing the uploaded material from different locations and devices," she told us. "It's a sufficiently distinguishable use case that it's reckless to suggest Amazon would be shielded by the Cablevision decision.")

If that deal is enough to placate the record labels, then that's relatively good news for the rest of us. It could mean that regular users would (theoretically) upload their own music libraries and stream it to themselves, while streaming cloud-licensed songs to their friends. Not the most ideal option in the world, but still pretty good considering the alternative:

"The record labels believe a cloud license is worth hundreds of millions of dollars, if not billions, over the next decade," Robertson told us. "And, the record labels are really infatuated with the notion that cloud lockers are going to be used for pirating."

As long as media companies think of file lockers as piracy devices, they will be at war with them. If Amazon is able to convince these companies that file lockers really are file lockers -- and that royalties will be there if the music is streamed to someone else -- we could eventually find ourselves with more (and better) storage and streaming options.

On a closing note, Howell observed that Amazon MP3's terms of service are worded quite differently than, say, iTunes' terms of service.

"It's interesting to note that Amazon tells users of its MP3 music download service they have the right to 'copy, store, transfer and burn the digital content only for [their] personal, non-commercial, entertainment use.' Though they may sound benign, those are some pretty broad and potentially controversial assertions," she said.

"Perhaps Amazon has been positioning itself, in anticipation of this new service, to argue users do indeed have all these rights in their digital music?"

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