Apple signs cloud deal with Warner Music
Apple has reached an agreement with Warner Music Group to offer the record label's tracks on iTunes' upcoming cloud-music service, music industry sources said. — In the race to the cloud, Apple is apparently stepping on the gas.
Context & Ripple Effects
Apple has been building toward this for over a year: back in March 2010 the company was already reportedly working on moving customer video into the cloud, and the Warner Music agreement reported by music industry sources today extends that ambition to music. The deal is still unconfirmed by either company, but it would make Warner the first major label whose catalog is publicly tied to iTunes' upcoming cloud-music service.
Why it matters: a cloud locker is only as good as its licenses. Apple signing a major label suggests it is pursuing a fully cleared service rather than a workaround, which sets the commercial template every other label negotiation will now be measured against.
First-order effects
- Warner Music Group's catalog would be cleared for iTunes' cloud service at launch, making Warner the reference-point deal Apple takes into negotiations with the remaining major labels.
- iTunes customers gain a path to streaming or re-downloading purchased Warner tracks across devices instead of managing local files, if the reported terms hold.
Second-order effects
- The labels that have not yet signed face pressure to close comparable agreements before Apple launches, because a cloud service with visible gaps in the major catalogs is commercially weaker on day one.
- Publishers and labels gain leverage to price cloud access as a new right separate from download sales, since Apple has demonstrated willingness to pay for it.
Third-order effects
- If the pattern holds, music retail shifts structurally from selling owned files to licensing cloud access, turning iTunes from a download store into a subscription-style platform and making label licensing the gating factor for every consumer cloud-music entrant.
The trend: Recorded music is migrating from downloaded ownership to label-licensed cloud access, with each major-label agreement setting the pricing template for the next.