Why Amazon leaped into the cloud without licenses: 'users acquired early usually stay put'

Although Amazon.com reportedly took a very strong stance with regards to its new digital music locker service, including both Cloud Drive and Cloud Player, it's reportedly looking into licensing the music uploaded to its music locker post-launch. Why then, would it take the aggressive step of launching before it reached that stage?

The answer is easily, when you think of things: to be first.

Earlier, Amazon.com portrayed its Cloud Drive service as just another storage medium. Craig Pape, director of music at Amazon, said,

"We don't need a license to store music. The functionality is the same as an external hard drive."

That said, it's well known that both Apple and Google are investigating similar services, and are entrenched in negotiations over rights and licenses for the uploaded music.

However, C|Net reported the key to Amazon.com's decision to beat both of the other companies to the punch:

One studio source told me recently that research has shown digital-lockers users may be reluctant to switch after going to the trouble of uploading their media. The source said the studios saw the same thing with iTunes. People don't typically leave. That means any service that acquires a user first stands to keep him or her.

Since it was reported earlier last week that Google has begun testing Google Music internally, and it was reported earlier this month by Bloomberg that Apple is in the midst of negotiations with labels over licensing, Amazon.com saw the writing on the wall.


It made the decision to leap past Google and Apple, perhaps into lawyer-infested waters, but also, by being first, perhaps acquiring users it wouldn't (possibly) lose later.

[It's true that Apple's iDisk feature of MobileMe has similarly enabled users to manually upload their music (and other files) to the cloud for streaming playback, but manually. Apple also has not been publicizing this, perhaps because of negotiations for a more far-reaching program.]

What's next for the music labels? Legal options are always there, but the labels were apparently surprised by Amazon.com's actions. One spoke to Reuters:

That executive called the move "somewhat stunning" and noted that some within the media industry said the service might be illegal.

"I've never seen a company of their size make an announcement, launch a service and simultaneously say they're trying to get licenses," said the executive, who requested anonymity because the discussions were not public.