Pile of CDs

The record industry's Cloud-based distribution challenge

Cloud-based digital locker music services are the latest challenge that the record industry faces. But will these new streaming and download services allow the industry to reap financial rewards or will they legitimise pirated content?

Fifteen years ago, when digital storage technology and compression algorhythms became strong enough, the record industry suddenly found itself in a panic. It had to play catch-up with the computer industry and adjust how it managed its rights and how consumers were copying their CD collections to computers and portable devices.

What they came up with was digital rights management - a method of controlling how digital music could be downloaded, copied or streamed, primarily to protect their revenues. It has, at the very best, been a qualified success.

But the record industry and performance rights organisations are now facing a new challenge based on the emergence of cloud services.

Companies are developing services that enable consumers to upload their digital content to storage servers over the Internet and stream it on any device. In many circumstances, the process of uploading digital content is eliminated.

Mobile phone retailer Carphone Warehouse launched a digital locker service called Music Anywhere, which allows customers to store their music collection in the cloud to be accessed by different devices.

Customers will pay a flat fee of £29.99 a year for the service - or it will be bundled into the handsets sold by Carphone Warehouse - and a portion of the revenues will be divided among the rights holders on a pro rata basis, depending on how much each track is played.

Music Anywhere aims to pay royalties for all music stored and streamed over the service. The platform provider behind the service, Catch Media, has already secured licensing deals with all four major labels and several indie-music aggregators before launch - overcoming much of the digital spaghetti of music rights management.

The service scans customer's hard drives for music and tries to match it with the tracks in its six-million-strong catalogue of licensed music. Once a match is discovered, the same track in the catalogue is added to the user's account. If a track is not found, the corresponding track on the hard disk is uploaded to the customer's digital locker.

The customer is then able to stream his or her music to Web browsers, computer devices and one predefined handset, which can be an iPhone, Android or BlackBerry device. Platform provider Catch Media plans to keep a record of unlicensed music and analyse how often each one is streamed, so that if and when licensing deals are secured, the record companies and other rights holders will get their royalties.

Legitimacy

Yet digital locker services are seen by many in the music industry to encourage piracy because they make the ownership of pirated tracks more attractive by providing access through the cloud.

For example, there has been a long-standing rights scuffle involving MP3 music service pioneer Michael Robertson, who is being sued in person by EMI Records for running a music-locker service MP3tunes.com.

Music Anywhere is attempting to legitimise music locker services in the eyes of the music industry. Although a lot of the music uploaded will be 'illegal', the service will provide an opportunity for the industry to earn some revenue from this content - although subscribers whose music collections are mostly pirated might have their subscription terminated.

Independent provider

Other mobile operators will most likely follow suit. The biggest threat will come from Google, which is planning to take on the role of lead player in the deployment of cloud-based services. The advantage of an independent provider is that the user is able to change mobile provider without having to re-sync his or her content.

Digital radio manufacturer Pure is also counting on this. It formally launched its FlowSongs music service in August. The service allows people to tag songs playing on their DAB radio and purchase them for download via their PC, while making the songs available as streams on the radio. To offer this service it has partnered with Shazam (using their digital fingerprinting technology) and 7digital's platform to launch the service.

Shazam, commonly found as an app on smartphones, gathers a brief sample of music being played. An accoustic fingerprint is created based on the sample, which is compared against a catalogue for a match.

Subsequently, the track can be streamed through one of Pure's Flow capable digital radios. It will be available for download from Pure's website thanks to 7digital's music locker platform.

However, it was reported that some independent labels had not been consulted on the streaming service. Simon Wheeler from Beggars Group said that his label's catalogue hadn't been licensed, and claimed the subscription fee showed that it was a premium service - for which labels deserve a cut beyond their share of download revenues.

'Over 85 per cent of 7digital's music catalogue will be available to FlowSongs customers to purchase, stream and download. However, a very small minority of rights owners are still considering the rights issues associated with the secure streaming of legally purchased content and have opted out,' says a spokesperson for Pure.

The company says that it plans to persuade more of the independent labels to sign up.

The company behind Pure, Imagination Technologies, plans to license the cloud-based technology to companies beyond music rights management.

Imagination's Flow technology is a platform for connecting devices to the cloud across both Internet and broadcast channels.

Cloud-based services

The Flow technology includes licensable hardware based on Imagination's silicon IP and supporting software solutions, complemented by a range of Internet-based technologies and a rapidly expanding portfolio of cloud-based resources.

'We will enable the next wave of ubiquitous connectivity in all manner of consumer, industrial and embedded products,' says Tony King-Smith, VP marketing, Imagination Technologies.

Pure's role includes that of a pathfinder product division demonstrating the benefits of making maximum use of Imagination's IP to create industry-leading products. Therefore, the Flowsongs offering could be a bellweather for how cloud services will be implemented in the future.

The company says that it is engaging with lead partners for this technology now, and will be making a series of announcements in the coming months of specific offerings and services based on Flow technology.

How will iTunes respond to these new cloud-based offerings? It already has the lion's share of legitimate music downloads. Speculation has been rife that it might launch a music locker service of its own. Currently, it allows music to be streamed over a home wireless network - but nothing more. For it to launch its own cloud offering would truly legitimise this delivery model.

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