The Real Story Behind The Legal Dangers Of Clouds And Music

little boy kid listening on headphones

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Who would think something so harmless sounding as a “cloud”  could be the latest reason behind a potential sizzling legal showdown between the recording industry and tech companies, but that very well may be the case. Amazon boldly announced its foray into the cloud space just recently via its Cloud Drive digital music online locker service and has reiterated in the press and to the record labels that it needs no licenses further licenses from the music industry from which to do so. 

Meanwhile, all indicators seem to point to the fact that Google may either take a similar approach to Amazon, shut down their reported music cloud work all together or simply eliminate certain elements that are licence-sensitive given the tech giant’s apparent frustration with record label talks. 

But one player in this scene knows all too well the exhorbitant and mud-slinging legal challenges when it comes to cloud services and the recording industry. In fact, it entered into the tangle of record label legal departments four years ago; and the results from its upcoming legal ruling will set precedents and, perhaps, shock waves around the industry.

Enter MP3tunes, a service created to store a personal music collection online and making it possible to sync it (download) or stream it to any device enabling  music fans to listen to their growing collection anytime and anywhere.  However, MP3tunes founder and  CEO Michael Robertson quickly discovered that it might not be as easy to bring his product to the market as he first anticipated almost 11 years ago, and the business saga is a fascinating one to which Amazon and Google should be playing close attention.

“In 1997, explains Robertson,  “I started, the grandfather of digital music. brought MP3 technology to the masses by encouraging independent artists to use it as a promotional too.  Meanwhile we were fostering the nascent digital music industry with conferences and industry coalitions and cooperation which brought us easy to use software to play and organise digital music as well as the first portable MP3 players, the first car MP3 player and more.”

“Then, while at I launched a service called which made it possible for users to store their personal CD collections online. It was fast and easy to use as popping toast into a toaster,” Robertson says smiling.  “We worked with CD retailers who could offer online buyers immediate digital access while they waited for the actual plastic disc in the mail. Sales were up 17-40% for retailers that supported us. Then Universal Music sued objecting to the service. Even though there was ZERO sharing and we were growing CD sales the music industry sued. The fight is always about control.”

Ironically, however, after Universal’s legal complaints were lodged, was indeed forced to cease its business activity; and Universal ended up purchasing MP3 for approximately $400 million.

A few years later and still undaunted, Robertson created a new start-up called MP3tunes which offers cloud music services. “But instead of beaming CDs up to the net,” he explains, “users had to upload each song just as you’d upload photos to Flickr. It’s 100% legal, but once again the music industry sued. This time it was EMI Records, one of the big four record labels.”  In fact, MP3tunes has been mired in litigation ever since this time and has racked up millions of dollars of legal fees.  “[My belief is] that this is part of the record label strategy,” says Robertson. “Record labels often win legal fights simply because they drive the small company to financial ruin and win by default. They file a non-stop barrage of motions and take depositions of everyone in the company some multiple times. If they can distract the company from growing its business, if they can intimidate partners, then that’s a victory regardless of the legal outcome. ”  However, given the deep pockets of Amazon and Google, this reported tactic may be one that the labels will need to change and may discussed at length during reported closed meetings just last week between Amazon and several record labels. 

Amazon is not saying what was discussed at these meetings, but Robertson has a pretty good idea of the behind-the-scenes scenario.  “The music industry wants a world where every time you click “Play” on whatever device you use they get paid – even for songs you already bought and own,” he says. “They want to transform the industry into a rental model – even for CDs and songs you’ve already purchased. That’s their goal and any company that offers a service that doesn’t fit their vision will be a target.  Amazon (like MP3tunes) doesn’t pay anything to the record labels since users are playing music they already have. This threatens the rental world the big music companies want to force on everyone.” 

Thus it would seem that based on MP3tunes legal adventures that the record labels must eventually sue Amazon or watch their rental vision fade away. If Amazon doesn’t enter into a licence and faces no litgation, then competitors can’t agree to licenses which would make their service more expensive and more limiting than Amazon’s.

“My advice,” says Robertson,  “would be to expect a fight, likely in the court house. Media companies use courts as a hammer to smash anything they view as a competitive threat.  Our 4 year legal battle is over and all the arguing and papers are submitted to the Judge.  There’s no time he must rule within, but experts I’ve spoken with expect a ruling sometime this summer. If we prevail Amazon and others will be emboldened.”

But if not….

“Someone has to go first and blaze the way for new technology and that often means defending it in court,” says Robertson defiantly. “When the first commercial portable MP3 player was invented they were sued. I helped battle the labels in court then and everyone with an iPod or MP3 capable phone is now the beneficiary. Today the battle is for ownership. I want my kids to be able to own and control their digital property. I think that’s worth fighting for.”

EMI did not return calls for interview requests. 
Lauren DeLisa Coleman is a socio-economic digitalist who speaks, writes and consults about  the business and cultural impact of Gen X, Y and digital platforms.  Her work has appeared in The Daily Beast/Newsweek, The Huffington Post, The Network Journal and The Atlanta Post.  Follower her @mediaempress