iCloud: Apple Signs Deal With Major Music Labels; Negotiating With Film Studios To Include Movies And TV Shows

BY Jason

Published 31 May 2011

iOS 5

Apple announced earlier today that Steve Jobs will unveil its new cloud based service called iCloud at WWDC 2011 keynote.

So not surprising after today’s announcement, the blogosphere is buzzing with rumors and speculations about Apple’s upcoming cloud services offering.

MG Siegler of TechCrunch provides some more details about iCloud:

  • iCloud will include a music locker that mirrors your iTunes collection online and makes it available via streaming to any device.  But as I’ve argued, it needs to be much more than this.
  • It will be more than just music.  In fact, iCloud will likely replace Apple’s so-so MobileMe service.
  • Not only that, iCloud could be baked right into iOS 5, which will also be announced at WWDC.
  • Once it’s baked into the OS, any number of new iCloud services can be launched in the future, such as a location service for friends and family.

Last week, BusinessWeek had provided some interesting details about how Apple’s digital music locker – one of iCloud’s feature will work.

Wall Street Journal has just reported that Apple has signed deals with major record labels for its cloud based service:

Apple Inc. has reached terms with major recorded-music companies to allow it to launch a digital locker service that would be more robust than those currently offered by Google Inc. and Amazon.com Inc., according to people familiar with the matter.

According to these people, deals with three labels have been completed, and the fourth, with Vivendi SA’s Universal Music Group, is likely to be signed this week. Apple has signed deals with Warner Music Group Corp., Sony Corp.’s Sony Music Entertainment and EMI Group Ltd.

By signing deals with music labels, Apple will be able to store a single master copy of a song, which will save significant upload time for the user and storage requirements for Apple. This will also help Apple to race ahead of Google and Amazon in the race to the cloud. Music Label are also hoping that Google and Amazon will fall in line once Apple launches its cloud based service.

Meanwhile, CNET reports that according to “two sources close to the negotiations” Apple is trying hard to sign deals with film studios before next week’s launch so that iCloud can also serve as a digital locker for movies and TV shows:

In the past several weeks, Apple executives have stepped up their attempts to convince some of the major Hollywood film studios to issue licenses that would enable Apple to store its customers’ movies on the company’s servers, two sources close to the negotiations told CNET. Apple began discussing a cloud service with the studios over a year ago.

The report claims that one of the problems that Apple and film studios such as Warner Bros. Pictures, 20th Century Fox, and NBC Universal are currently dealing with is the so-called HBO window or HBO blackout. These studios are apparently required to stop sales and distribution of their content while it is being aired on HBO. It may be difficult for Apple to put such restrictions on its users, so it is trying to workaround this problem. But according to CNET, Apple could still go ahead and launch the service with other major flim studios such as Disney, Paramount, and Sony that do not have blackout arrangements with HBO.

The other important question is; how much will it cost?

According to Business Insider, Apple is unlikely to offer iCloud for free as it has paid dearly for the cloud music licenses. Business Insider speculated that Apple could adopt the following pricing strategy:

  • A subscription service where consumers pay a monthly fee, either a flat fee or a staggered fee structure based on storage capacity. (Or possibly part of the MobileMe subscription.)
  • A free “value-add” for iTunes and App Store purchases, where Apple makes its real money selling more iPhones, iPads, and Macs. (And some extra pennies selling digital media.)
  • A free-to-consumers service that developers pay for.
  • A combination of these models.

Our best guess: A freemium model, where anyone can get their feet wet for free, and power users can buy more capacity for a monthly or annual fee. (Remember, this is still a weird concept for a lot of people, so Apple would be smart to give a low barrier to entry.)

Apple is known for keeping pricing simple, so we don’t expect a lot of choices — good, better, best. We’d expect subscriptions to start around $5 to $10 per month, and max out around $50 to $100 per month.

Are you excited about iCloud? What’s on your wish list? How much would you be willing to pay for it? Let us know in the comments.