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Amazon's Cloud Player Beats Apple to the Streaming Punch

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Amazon announced a new service over the weekend that allows its customers to store MP3 content in the new Amazon Cloud Player, accessing it from almost anywhere with the Amazon Cloud Player for web and Android devices. 

Anyone can sign up for Cloud Drive, receiving five gigabytes (5GB) of storage for free, which puts storage in Amazon's free version of its storage-locker-in-the-cloud service at a significantly higher amount than the free version of DropBox (2GB), but lower than Microsoft's SkyDrive (25GB).

Last year, we wrote about two significant Apple initiatives—its new data center and the acquisition of Lala.com—both of which Amazon's Cloud Drive announcement pre-empts.

The new billion-dollar data center, based in Maiden, North Carolina, is thought to be part of Apple's strategy to modify its languishing MobileMe service—which provides 20GB of storage space for a $99 annual fee—but the data center's operational start has been plagued by set backs. Analysts believe the new data center could be geared toward a very similar scenario as Cloud Drive, perhaps offering MobileMe storage for free, so that users can store movies and songs.  As for the Lala acquisition, the long-anticipated cloud version of iTunes that it supposedly portended is nowhere in sight.

The reasoning behind Amazon's the 20GB-storage-for-an-album transaction might not just be coincidence, for two reasons.

First, Amazon already set precedent with Amazon Prime free streaming last month, showing a new model of pay-for-play that Cloud Drive seems to be following.

Second, Amazon may be showing the record labels that it can incentivize the purchase of more than just single-song MP3 files from the Amazon store, at a time when album sales have slumped both online and offline. Think of it as a Amazon's "performance tax" or a cleverly modified version of the recording tax that France and other countries placed on blank CDs and even on iPods, with funds going to support record labels. In this case, Amazon gets to show it's being a good team player, and most customers won't mind springing for $9.99 to cover a year's worth of storage.

What happens after a year? Amazon has priced its Cloud Drive at roughly $1 per GB, so 20GB would cost $20 annually, 50GB would cost $50, and so on. By comparison, DropBox offers 50GB of storage for $99 per year, and Amazon's new Cloud Drive offers 20GB of storage for anyone who purchases an MP3 album from the Amazon store.

Purchases of MP3 content from the Amazon store can be placed in the Cloud Drive locker, with no storage impact to the free or purchased storage space. It will be interesting to see if Amazon is actually required to put an actual copy of purchased MP3 files in each user's Cloud Drive, for accounting purposes, or if a pointer from a user's Cloud Drive to a single MP3 file that thousands of users can access will suffice.

The team player issue mentioned above has constantly been a thorn in Apple's side, as its initial negotiations with record labels and studios not only were unbalanced, to hear the studios tell it, but also took a huge chunk of physical world sales as customers moved to online music and—to a lesser extent—purchased movies online. Not surprisingly, one of the reasons noted for Apple's data center launch delay is the company's ongoing negotiations to allow streaming of music content.

Beating Apple at its own Game?

Which brings us to the second area where Amazon is pre-empting Apple: streaming music from the Cloud Drive.

Amazon announced the Cloud Player for web and Android devices, but not iOS devices.

This isn't to say that an AAC file stored in the Cloud Drive can't be played to an iOS device, but the ease of use is definitely missing: an iPad, iPhone, or iPod touch user would need to access the web-based version of the Cloud Drive page—sans app—and then select a single song to play, which will then be progressively downloaded to the QuickTime player built into iOS. Listening to a second song would require a repeat of accessing the web page, progressively downloading and then listening in the QuickTime player—an arduous process.

Of course, with Lala, Apple already owns a company that streams music from the web. Before Apple's purchase of the company, Lala had settled on a stream-as-you-go service that allowed its listeners to use credits to listen to songs for as little as $.10 per song. The credits, bought in bulk to limit transaction costs, could also be applied toward the purchase of songs at $.89 per song.

One of the key features of Lala was its ability to combine the cloud-based storage locker model with streaming delivery, the exact same model that Amazon is now espousing with Cloud Drive.

Apple, however, shut down Lala in mid 2010, perhaps to roll the service into a new version of iOS or iTunes or the upcoming Macintosh operating system, OS X Lion (10.7).

In Lala's prime, any song that had been uploaded from the user's hard drive to Lala was available for unlimited playback.  Today the only options available to iOS devices these days come from non-Apple sources. In short, Amazon beat Apple to the punch on this one, bringing Google's Android operating system along for the ride.

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