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Apple's deals with music labels hint at sub service

Reports of licensing agreements put spotlight on 'jukebox in the sky' service, say experts

May 20, 2011 03:15 PM ET

Computerworld - Apple has struck deals with three of the top four music labels that will let consumers access their digital music collections from mobile devices like the company's iPhone, several reports said this week.

The agreements also hint at the possibility that Apple will roll out a digital music subscription service that would create a "jukebox in the sky," a move that could push music revenues to levels last seen more than a decade ago.

According to anonymous sources cited by CNET News Wednesday and by Bloomberg on Thursday, Apple has wrapped up negotiations with EMI Music, Sony Music Entertainment and Warner Music Group.

The remaining holdout: Universal Music Group, the largest of the four.

Bloomberg reported that Apple is close to wrapping up a deal with Universal.

"This sounds like a public relations balloon," said Aram Sinnreich, a media professor at Rutgers University. "Apple's leaking news of these deals to put pressure on Universal to get the same deal that the other labels have agreed to."

If the reports are accurate, Apple could soon launch a label-authorized cloud service to compete with the similar, but unlicensed, services -- dubbed "lockers" -- already in play from Amazon and Google.

With a cloud service in place -- likely part of Apple's MobileMe, which analysts believe will be revamped this summer -- customers will be able to play tracks from their iTunes collection over the Internet, giving them anywhere-access to their music from iPhones, iPads, iPod Touches and Macs while away from home.

Analysts applauded the news, but expected Apple to do more with the licenses than just duplicate Amazon's and Google's in-the-cloud music lockers.

"If the labels are ready to play ball and embrace a fundamentally new model, licenses can make a huge difference," said Sinnreich.

Sinnreich believes that licenses aren't required for a locker service -- he noted that although the labels were displeased with Amazon's March launch of Cloud Drive, they haven't sued either Amazon or Google -- and suspected that Apple's negotiations were for more than simply online storage.

That "more" could be the long-awaited subscription service, which would let customers play not only the tracks they already own, but millions of others by paying a flat monthly fee.

Sinnreich sees an Apple-driven subscription service as the Holy Grail of digital music, and in his eyes, one the labels should accept.

"The labels need a genuine celestial jukebox, one that not only offers streaming music, but recommendations, on-demand radio, community and social networking features, video and downloads," said Sinnreich.

And Apple is the best partner to do that.

"If Apple is the one who can offer an unlimited subscription music service, they'll become the leader," said Ezra Gottheil, an analyst with Technology Business Research. "Apple shows all the signs of understanding the music listener better than anyone else among the competition."



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