Amazon, the online retail behemoth, has decided to forgo that pesky thing called a music license as it launches their Amazon Cloud Drive, a “virtual” place where Amazon customers can store their digital music on Amazon’s gargantuan servers. Once stored, Amazon facilitates “streaming” of those music files to a computer or handheld device through Amazon Cloud Player.

Amazon has taken the position that they don’t need a license because their customers are only going to store and stream music that they already own. It looks like the record companies may not agree with that point of view. They’re either staying mum, or, as in the case of Sony, “reviewing their options”.

Amazon spokesperson Cat Griffin said yesterday (Tuesday), that “Cloud Player is an application that lets customers manage and play their own music. It’s like any number of existing media management applications. We do not need a license to make Cloud Player available.”

That statement is basically the corporate equivalent of Amazon sticking out their tongue at the music companies and saying, “Nyah, nyah, you can’t catch me”, as they run around the room, knocking things over with their outstretched arms. It will be interesting to see how this plays out.

Amazon is going to give their customers 5GB of Cloud Drive storage for free as a come-on, and if users subsequently buy an MP3 album through Amazon, they’ll be upgraded to 20GB of cloud storage free for a year. By the way, it’s not just music; you can store whatever digital files you want in the Cloud – music, photos, videos, etc. You can use it as your entertainment box or you could use it to store thousands of pages of that great novel you’ve been working on for years.

The other consequence of Amazon’s announcement is the surprising fact that they have now beaten the two companies to the “cloud” that everyone thought would be there first – Apple and Google. All the smart money was on one of those nimble companies making their music cloud available first, but their best efforts have always been stymied by the fact that they always assumed they would need licensing form the music companies, and the music companies were in no hurry to provide those licenses, since the terms being offered by Google and Apple were not to their liking. There has got to be a lot of teeth-gnashing going on over at Apple and Google this week since Amazon’s announcement.

But, the fact that demand for a “cloud” digital storage locker has not yet been proven out or quantified in any way is a very pertinent fact in this dynamic. There have been other small, similar services that have come and gone, without ever making a profit. Amazon has got the girth, the brand and the marketing heft to garner a large amount of customers for their cloud service simply by virtue of announcing that it’s available, but will it be a money-maker for Amazon? Or, will it come to be viewed by the company as a nice little “added-value” feature that helps along sales of MP3 music, digital videos, e-books, audio books, etc. and doesn’t cost the company too much since they already have all that server space, and therefore, is mostly worth keeping around?

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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