Forecast: iCloudy With A Chance of New Revenues

In what may come to be viewed as a music industry watershed moment, just like the invention of the phonograph, the CD, Napster and the iTunes store, Apple has come to terms with record labels and music publishers to be able to launch its iCloud music service. The upfront cost, reportedly close to $150 million will enable the technology giant to create an online storage environment that eventually should give users a chance to experience and enjoy a “jukebox in the sky.” Once in the cloud, users can access music from a variety of locations and across all hardware platforms. According to the New York Post, Apple paid each of the four labels between $25 and $50 million each.

Actual details of the new iCloud service remain speculative until Monday June 6 when Apple will reveal all during its keynote address at WWDC (Apple Worldwide Developers Conference) in San Francisco. Apple CEO Steve Jobs is expected to be on hand to participate in the presentation.

Insiders are reporting that music companies will take 70% of the iCloud fees with 12% going to music publishers and 68% going to labels to be shared with artists, etc. Apple will hold the remaining 30%. CNet reports that Universal was the last label to agree to participate in the iCloud deal. Until the size of the revenue stream becomes clear it is too early to judge, but according to the math, publishers will now have a 17% share of royalty revenue collected (12÷70=17%).

A key feature of the new system is called scan and match which frees users from having to upload the songs, which can be highly time intensive.Instead it scans a users hard drive and then matches the music to the cloud’s master library.