Peter Kafka

Recent Posts by Peter Kafka

Amazon Tells the Music Labels to Quit Crying About the Cloud, Start Cashing Royalty Checks

It’s been two weeks since Amazon launched its cloud-based music service. And Amazon says it’s been a big success–for the music labels.

In a letter sent to the big labels, Amazon says it has been selling more MP3s since it launched the service. In other words: Stop whining about licensing deals and start thanking us for making you more money.

It’s easy enough to imagine sales jumping in the last two weeks, as lots of people dropped by to try the service out. And Amazon gave users a real incentive to buy more songs while they were there by offering increased storage to anyone who bought an album at the online store.

But Billboard’s Ed Christman, who’s seen the letter, says Amazon doesn’t have anything else to say about its recent sales spike–like, say, numbers.

Instead, the letter is dedicated to:

  • Reminding the labels that Amazon has no interest in seeking licenses for the service it has already launched “as no licenses are required.”
  • Letting the labels know that, actually, it does plan to come to them for other licensing deals soon, as it contemplates “potential enhancements” to the service.

Why does Amazon feel that it didn’t need licenses for its initial launch but will need them down the road?

Part of the answer is a technical one that deals with the way the cloud service works, and whether users are actually uploading a copy of their own property to the service or if Amazon is keeping a single master file for multiple user’s songs.

But the real world answer is that this is a clever/ballsy strategy on Amazon’s part: It’s signaling to the labels that they’re going to get at least some of what they want–eventually. It’s just that Amazon is in a hurry and didn’t want to start negotiations from scratch–not when Google and Apple are looking at similar ideas.

So far it seems to have worked. Not only have the labels stayed mum, more or less, about their displeasure with the service, they haven’t done anything more forceful either–like taking their songs out of Amazon’s store or suing the company.

And if Amazon’s right, the labels may have no real choice but to keep their mouths shut and cash some checks.

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