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. All Things Digital reported Thursday that Apple has signed two of the top four record companies and wrote that Apple content chief Eddy Cue was due to be in New York on Friday to try and finalize agreements with the two still unsigned labels.

It's unclear whether Warner was one of the two record companies that had previously licensed Apple or whether the New York-based label inked an agreement on Friday. A Warner Music spokesperson declined to comment. An Apple representative was not immediately available.

Warner Music is the third-largest of the top four labels and home to such acts as Linkin Park, Flo Rida and Green Day. The other record companies are Universal Music Group, Sony Music Entertainment and EMI Music. At the same time that Apple makes the rounds at the labels, Google has grown frustrated and has told the labels that it's exploring the option of breaking into cloud music by striking partnerships with existing services, including Spotify, say sources with knowledge of the talks.

What's in the cloud?
There's a lot of news leaking out about the land grab going on for cloud music, so maybe we revisit what all the fuss is about. First, cloud music is supposed bring back riches to the record labels, stimulate music sales for iTunes and other Web music stores, and supply fans with added convenience.

The term "the cloud" describes third-party computing. Apple and Google have each talked to the large record labels about creating cloud services that would enable users to store their existing music libraries on the companies' servers. Consumers could then access their songs from anywhere they could connect to the Web. This makes it possible to offer users lifetime rights to songs. They wouldn't have to worry about an inoperable CD or a malfunctioning hard drive. Their libraries would live forever in the cloud.

Related links
• Google talks to Spotify to power music service
• Why Google should acquire Pandora
• Amazon may soon launch film, music locker service

Neither Apple nor Google has confirmed publicly that it's building such a service, but numerous news sites, including CNET, have reported that in addition to speaking to the top music labels about the cloud, they both have discussed launching cloud features for video with some of the Hollywood film studios.

The contest between Apple and Google is now for second place. Amazon stunned the recording industry last month by launching a cloud service for music, video, e-books and other digital media. But Amazon's service is restricted because the retailer decided to launch without acquiring licenses. That means it can't offer a wide range of features without risking violating copyright laws.

For instance, Amazon might have made the service more efficient had it licensed the right to make single copies of the labels' songs and then deliver those copies to users. It could have scanned users' hard drives to make sure they owned, say, "Boulevard of Broken Dreams" and then streamed the same copy of the song to all owners of the track. Without the licenses, Amazon must store possibly millions of copies of "Boulevard."

A frugal Google?
The features that Google and Apple are working on are supposed to be much richer than Amazon's, music sources said. One surprise about the competition among these Internet titans is that Google is having a hard time licensing music. All the industry sources I have talked to say that top labels were practically hyperventilating at the possibility that Google would make a foray into the space. They were thrilled that the sector would finally see a deep-pocketed iTunes competitor, one that could match the kind of hardware and software one-two punch that Apple delivers.

Google's Android mobile operating system has proven popular with the public and top handset manufacturers. Google Music could have a large audience the day it launches. That said, Google and the labels also have a history of haggling over money. Warner, the company that has already signed with Apple, pulled its music videos from YouTube in 2009 following a contract dispute. The two sides eventually came to an agreement.

Here's the big question now: Is Google serious about looking for an alternative way into cloud music, or is this a negotiating tactic? I wrote this week that acquiring Pandora, which the Web's most popular radio service, might help give Google some added negotiating leverage in talks with the labels.

Here's the one card, though, that nobody in the music industry wants Google to play. The search company could just decide to pull out and stick with YouTube, which just happens to be one of the Web's most popular music sites. Anyone can listen to free music there by watching the scores of music videos there. If Google chose this path, it wouldn't be the first time the search company has indicated it would launch a standalone music service and then pull out.

Music industry sources said Google has expressed interest in opening a music store multiple times in the past during discussions with record-label execs. In 2009, some of the big record companies were led to believe that a Google search feature that focused on music was the start of something bigger.

Google directed people, who had keyed in the name of a song into its search field, to audio previews of the track. This was later scrapped and Google didn't make another peep about music until last year, when it started talking about the cloud. So, it's not guaranteed that we will get head-to-head competition between Google and Apple some of us hoped to see.

We can console ourselves with this: by all appearances, Apple's cloud-music service is on the way.