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iCloud: How Apple monetized piracy

By ; June 10, 2011 at 5:00 PM 

I’ve never bought a song on iTunes in my life. I have a thing about paying for music if I don’t get a physical copy. But I also don’t buy that much music anymore period, because, well, I can get pretty much anything I want for free, and I have other, more urgent uses for my money. At the same time, I’m acutely aware of what people like me have done to the music industry and to musicians, and I’ve always said that if there were a legal way to obtain music digitally with the same freedom and flexibility as piracy, I’d gladly pay for it. We aren’t quite there yet, but Apple’s introduction earlier this week of the iCloud at their annual Worldwide Developer Conference is as strong a step in that direction as we’ve seen thus far. There had been rumors for months that Apple was planning some kind of cloud-based storage system for music purchased on iTunes, but for obvious reasons, I assumed this wouldn’t be of much use to me. However, as I watched Steve Jobs break down iTunes Match, the iCloud’s $25-per-year service that treats your personal, non-purchased (read: ripped or pirated) music as though it were from their store, I couldn’t help but think that he may be onto something.

When Jobs announced the iTunes Match program at the close of the WWDC keynote, he carefully danced around the notion of piracy. He characterized the hypothetical person who would be interested in the service as someone who has a lot of music ripped from their personal collection, or is just missing a few songs that aren’t available in the iTunes store. But make no mistake, Apple is well aware of the reality of the situation, which is precisely why the iCloud, and iTunes Match in particular, are nothing short of game-changing.

There are no two ways around it: what Apple has essentially done with iTunes Match is monetize piracy. This is something everyone—and I mean everyone—has struggled with since Napster’s heyday. Apple themselves have arguably had the most success with their iTunes store, but they’ve hit speed bumps along the way in the form of low-quality files and controversial DRM protections. Subscription services like Rhapsody and the rebooted Napster had potential, but since neither of those services let you keep your songs if you stop paying the monthly fee, they will never be more than antiquated streaming services. Spotify, massively popular internationally, has struggled with record-company licensing in its attempts to cross over to America.

I haven’t seen a breakdown of the numbers, but considering the dificulty Apple experienced getting the major labels to sign off on the iCloud in the first place, I have to imagine they get a cut of the $25 annual fee. This is tremendous news for the subset of people who pirate music out of convenience but have some moral hang-ups about not supporting artists financially. Think of the $25 per year as a (absurdly reasonable) penance for the years of compromising your favorite artist’s ability to make a living. In all honesty, the fee should be two or three times what it is. I’d pay $100 a year for this if Apple asked me to. It’s the least I can do. It’s the least any of us can do.

A large part of the appeal of piracy, and the reason some people still cling to physical formats, is the availability of lossless, CD-quality files. Compressed MP3 and AAC files sound fine coming out of earbuds or laptop speakers, but if you, like me, have spent serious money on quality stereo equipment, they simply don’t get the job done. iTunes Match meets this group of people halfway: by giving you access to their store’s versions of songs you own, they allow you to keep your files on your computer. If you use Apple Lossless or higher-bitrate MP3s, you now have the ability to get those songs on your iPhone, iPod Touch, or iPad without wasting time converting them to more device-friendly sizes, which is both time-consuming and clogs your hard drive with duplicate files.

It’s a genius solution to the most obvious problem Apple would otherwise face in attempting to do this. Even charging $25 a year, it would be impossible for them to provide the necessary storage space for this many people to upload all of their files. Jobs showed the crowd images of a new data center dedicated to the iCloud that looked like something out of The Matrix, but Apple understands that music piracy wouldn’t have crippled the industry the way it has unless a lot of people possessed a staggering amount of files, which would have been insanely impractical to store. Simply giving everyone access to files that Apple already has available in the iTunes store is a perfectly rational and sensible workaround.

Amazon and Google have rolled out cloud-based music services recently, but the iCloud has one significant advantage over either of those companies: the iPod and iTunes. It doesn’t seem possible for this advantage to be underrated, but people tend to take for granted the fact that Apple’s MP3 player has been at the top of that market, prohibitively so, for a decade. There isn’t even a consensus on what the second-best MP3 player is, because no other product is close to relevant. Microsoft, Creative Labs, and iRiver have tried and failed to seize a share of the personal music player market, but at this point, it’s unlikely that any other company will even make a run at Apple’s dominance in that area. When choosing which, if any, of the new cloud-based music services to support, that has to factor into some people’s decisions, right?

The iCloud and iTunes Match don’t fully launch until Fall, and as usual with these things, it will likely take a while to evolve and fulfill its potential. Apple has struggled for over a decade to figure out the future of the music business, and with this embrace of cloud technology and the understanding that they’ll have to meet the pirates halfway, they’re getting dangerously close to solving it once and for all.

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