No cloud music for iPad's launch

For anyone hoping that a cloud-based music service will launch with the iPad this Saturday, disappointment is lurking.

Music industry sources told CNET this week Apple has informed label managers that a streaming music service is unlikely to be ready before the third quarter.

It will be a disappointment for iTunes fans who have been speculating as to when Apple might use music site Lala--which Apple acquired in December--for its streaming expertise to launch a cloud-based music service.

Some had hoped such a service might arrive when Apple unveiled the iPad tablet in January, but it was a no-show. That same month, Apple executives spoke to the major record labels about enabling people to store their music on the company's servers and access their songs with Web-enabled devices. At that point, music-industry insiders speculated that Apple's new service might debut early this year.

Besides a later-than-hoped-for start to Apple's streaming, all of this also means that music--which has typically played an important role in most of Apple's culture-changing devices--will be bumped to the sidelines with the iPad.

This time around, it's all about visuals: Hollywood movies, video games, books, and newspapers. This is Apple's crack at creating a device small enough to be mobile but big enough to provide comfortable reading and a mini-theater experience. Film and publishing industry insiders hope the iPad will catch on with the public, at least well enough to help steer big media out of a rocky transition period--one that NBC Universal CEO Jeff Zucker famously described as "trading analog dollars for digital pennies."

Similar to the situation with music, iPad owners shouldn't expect much more in the way of film content than what was covered in Apple's January unveiling of the gadget, two studio sources told me. Apple hasn't done much iPad-related planning with the studios, the sources said. "They sent over a tablet for us to fool around with," one film exec said.

Of course, iPad owners are going to find the same restrictions on obtaining movies as would any other iTunes user. There are still the problems with so-called windowing. Some of the studios have agreements that restrict sales at Apple, Netflix, and other movie sites during set periods--or windows--in which a cable company or premium movie channel has purchased the exclusive distribution rights.

Another hiccup is that some in Hollywood continue to fret about Apple's ability to lock down high-definition movies and thus have limited the number of HD films offered on iTunes, according to one of the sources, who did not name the studios.

The concern over digital rights management isn't new in Hollywood. Some decision makers there fear Apple's FairPlay digital rights management will be cracked and that film copies will be distributed across the Web.

An Apple representative declined to comment for this story.

It seems a strange concern when people constantly copy Blu-ray discs. Anyone can go to one of the BitTorrent sites to find oodles of pristine Blu-ray copies. But Jan Saxton, a film entertainment analyst for Adams Media Research, says that if Hollywood is overly concerned about piracy, it has reason to be.

She noted that on Tuesday, lots of film-industry insiders were buzzing about a Los Angeles Times story regarding widespread piracy and illegal downloading in Spain. The situation is bad enough that the studios are considering whether to halt DVD sales in that country. "The studios have to be careful protecting their rights," Saxton said. "The problem is if you don't make it available legally, then piracy runs even more rampant."

Of course, the iPad is more than just a music and movie player. The device plays games and is also an e-book reader. Apple has penned deals with top book publishers such as HarperCollins, Penguin Books, and Simon & Schuster. Digital versions of The New York Times and The Wall Street Journal will be offered on the device, as will Wired, GQ, and Vanity Fair.

When it comes to which industry is more important to the iPad, some in Hollywood chuckle at the notion that Apple could be licking its chops over book publishing. Two studio executives pointed out on Monday that for decades, consumers have spent far more money in movie theaters than in book stores. They've spent way more time in front of televisions than in front of books.

U.S. publishers posted estimated net sales of $24.3 billion in 2008, according to the Association of American Publishers. For the same year, the six top U.S. movie studios booked nearly the same amount--$22.4 billion--in DVD sales alone. When you combine worldwide box office sales--which reached nearly $30 billion, according to the Motion Picture Association of America--films accounted for more than twice the revenue of book publishers.

The iPad is another chance for Apple to tap into this market, remarked one film industry source. The Apple TV hasn't done much to revolutionize video viewing. (And isn't that really the standard for any Apple device now?) The company's iTunes store may be the largest retailer of video downloads, but sales revenue is still small compared with the studios' other traditional revenue streams, the source said.

One way to break out would be for Apple to offer a streaming service for video as well as music and then store everything on its servers. The film sources told CNET earlier this month that Apple is working on a plan to create digital shelves for iTunes users to store all their digital content.

There's still plenty of opportunity for Apple to do the same with video that it did for and to music.

"The iPad seems to have great potential," said Saxton from Adams Media. "But much still has to be overcome in the way of licensing and copy protection."