Forget Syncing, Let’s Put Music in the Cloud!

1Executive Summary

Can you believe that the commercial digital audio player (DAP) market is less than a dozen years old? From humble beginnings in 1998 to present day, the DAP is generally ubiquitous — if you look around and can’t see an standalone digital music player right now, chances are that there’s an integrated player in a nearby handset. To call this market successful might be an understatement, and Apple is clearly the dominant player. On the last quarterly investor call, Apple claimed more than 225 million cumulative iPod sales. Even with declining numbers of late, Cupertino is on pace to sell nearly 50 million iPods in 2009.

All of those devices need content, which explains the rise in digital music sales. IFPI estimates that U.S. digital music sales topped $3.7 billion last year (PDF), compared to a paltry $400 million just four years prior. And the major digital distributors all require some software or method to get music on those devices. While iTunes is synonymous with music purchases for many people, there are several alternatives — Amazon’s MP3 Store, Wal-Mart and others come to mind — and Apple doesn’t yet offer a music subscription plan like Microsoft’s Zune Pass, Rhapsody, Slacker, Napster or a host of others. But sync and subscription are only two melodic models. Isn’t it time we looked at a third option and started to store and stream our music in the cloud?

The Opportunity

Getting music onto a flash-based or magnetic drive device through a synchronization feature presents some challenges, however. Not everyone wants to use Apple’s iTunes synchronization, even if it’s generally considered easy and bulletproof. And of course, the only devices that can natively sync with iTunes for music on the go are the ones that Apple creates — the multiple flavors of iPod and the iPhone. Consumers without Apple hardware currently resort to using one of many third-party applications in order to move iTunes content to non-Apple devices, but that won’t work for iTunes protected music.

One recent development that has helped break the chain of Apple’s ecosystem is the company’s adoption of DRM-free music, much like alternative digital music stores offer; without the constraint of digital rights management, the entire digital audio player landscape opens. Consumers don’t have to pick a platform and then lock themselves — and their digital content — into such an ecosystem. This new freedom aside, however, there’s still an opportunity to leverage new technologies for carrying, storing and synchronizing music across multiple devices. And I don’t use the phrase “multiple devices” lightly. We’re at the point now where the purchase of digital music can be enjoyed on desktops, notebooks, phones, portable media players, car stereos and of course, the portable digital audio player. So what tie can bind most of these use cases together? Music in the cloud.

Why now?

Two trends are now converging to make music in the cloud an affordable and effective reality for many consumers: the declining cost of online storage and the proliferation of wireless networks. Clearly, the cost of flash media storage has decreased dramatically over time. That factor has certainly helped the rise of the digital audio player market — as the price per gigabyte has decreased, hardware players have benefited from more storage with little to no increase in costs to the consumer. But while the cost per gigabyte of local storage is inexpensive, online storage can rival such costs, adding data redundancy and backups at the same time.

We’re not yet at the point where a wireless connection is available everywhere, but there’s no denying that’s where we’re headed. Sales of smartphones and other devices with integrated wireless broadband are on the rise. Wi-Fi networks are proliferating everywhere you turn, and a national WiMAX network buildout is in progress in the U.S. For a large percentage of the population, wireless broadband coverage, in the form of 3G and Wi-Fi networks, is already here for email, instant messaging, and browsing. Why can’t the connections of today and tomorrow be leveraged with cheap online storage to stream personal media?

The best solutions could leverage this winning combination of wireless broadband and vast online storage services. Consumers could store music in the cloud and either synchronize it over-the-air for persistent use or simply stream it on demand — an either/or method isn’t required for this approach.

Potential solutions

Earlier this year, I took a close look at Zumodrive, which offers online storage and file synchronization. The service is like most any other in this space, but one feature stood out at the time — real time streaming of your Zumodrive-stored audio files to an iPhone. The mobile application might not have the bells and whistles of the iPhone’s native music player, but at its base level, it does precisely what I’m envisioning above. I don’t need to carry gigabytes of media on my handset, because the network combined with an online service is the storage. That leaves more room for software applications and “heavier” files such as large videos on a handset. And for consumers with limited storage space to begin with, this approach offers an easy way to expand such storage, even if it’s just a virtual method. The alternative in such cases is to use small memory cards, but that’s not a solution; that’s a stop-gap measure.

While nearly any of Zumodrive’s competitors — Dropbox or SugarSync, for example — could develop a similar streaming feature, one company is better poised to provide such a service than the rest. In fact, I’m surprised it hasn’t already done so. I’m talking, of course, about Amazon, which has all of the right pieces for this puzzle.

The e-tailer already offers DRM-free audio files in an MP3 format on its web site, so it has the content and the store already in place. In fact, its store is already integrated into mobile handsets running Google’s Android platform and Palm’s webOS, so the mobile delivery system is there too. With Android’s projected growth to the number two handset platform by 2012, Amazon has an opportunity it shouldn’t ignore. While it doesn’t offer connectivity, the content and store could be paired with its Amazon Simple Storage Service, or S3. A recent check of Amazon’s S3 pricing shows a monthly cost of $0.15 per gigabyte and a transfer cost of $0.17 per gigabyte.

For a simple illustration of costs, let’s use a 20 GB music library as an example. To get such a library up to Amazon’s S3 service and store it there for the first month would cost $6.40 — $3.00 for the storage space and $3.40 for the initial transfer. After that, a consumer could continue to store the library there for a recurring $3.00 each month. And transfer costs would likely be less than a half-dollar a month, assuming that a consumer wouldn’t stream or transfer more than 3 GB or so. A few dollars each month is well worth removing the hassle of synchronizing large numbers of music tracks on multiple devices. Ironically, Amazon is already using this basic model for its Video on Demand service — consumers don’t download videos, they simply stream them from Amazon’s servers where the content is safely stored.

Combining the scalable infrastructure and low costs of service, Amazon has everything it needs to offer a music streaming service. It wouldn’t take much effort to build a basic web client for such a service or perhaps Amazon could leverage its existing software already in use on some platforms. The application to purchase and transfer music already exists, so adding a player is the next logical step. And since we don’t yet have wireless connectivity everywhere, song caching should be a part of that player as well. As customers listen to one song, the rest of a playlist could be downloading in the background for temporary offline storage and offline playback.

There’s even a number of ways to handle the business model. A simple pay-as-you-stream by the month method could work. How about a flat-fee for 5 GB of monthly streaming? Or even take the Kindle approach by incorporating a little bit of the bandwidth cost at the point of music purchase?

Regardless of the business model, a streaming service like this could effectively remove the word “synchronize” from the digital audio market. And that’s music to my ears.

Kevin C. Tofel is the Managing Editor of jkOnTheRun.

Relevant analyst in consumer electronics
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  1. I’m using Lala now. It is essentially what you described. You can upload your music library to Lala or can buy song for unlimited streaming (but not for download) at a very low price.

  2. Isn’t this what Rhapsody is all about?

    -Jeff

  3. GrooveShark and others like it only offer a partial solution. They’re great on the desktop, but there’s a huge opportunity with handsets, which are on pace to sell more units than PCs. Mobile is where the growth is. Ultimately, I want to listen to my music on the “best” device, which is the one I have with me at the time.

  4. Kevin, what do you think about companies like GrooveShark? Their product is pretty top notch.

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