05/20/2011 03:40 pm ET | Updated Jul 20, 2011

Apple's Cloud Music Service Could Win, Despite Its Lateness

If Apple unveils a cloud music service at its Worldwide Developers Conference in early June, as expected, it will be months behind rival services from Google and Amazon. But, analysts say, despite being late, Apple will likely reassert its domination of the digital music space.

In the tech world, being the first to bring a product to market is an important coup. For companies in an industry characterized by its obsession with the new, getting to the finish line ahead of competitors can help determine the success, or failure, of its latest offering.

But Apple, which has repeatedly defied expectations by triumphing wildly with products like the iPad, is a company that possesses the rare ability to show up late to the party and still outshine everybody in the room. Now, the world is watching to see how Apple will fare in the burgeoning business of cloud music services, which allow consumers to upload music to a company’s servers, so that it can be accessed from any device with an Internet connection.

Analysts expect that a cloud music service by Apple will be a more fully-developed iteration than either Amazon’s or Google’s services. That likelihood, combined with Apple’s existing status as the premier destination for digital music, as well as news that the company is close to signing deals with all four major record labels for such a service, puts Apple in position to triumph over its rivals.

“There’s first mover advantage to some degree, but this is a new area,” said Mike McGuire, a VP of research at Gartner, a tech consulting firm. “The other side of that coin is that the first mover also gets the arrows in the back.”

While Amazon and Google have managed to outpace Apple by months, both of their cloud music services have already been heavily criticized, both by the unhappy music industry seeking its cut of the profits, and from consumers, who have found the quality of the services to be lacking.

Though Amazon’s service is not strictly limited to music (users could store photos or other files as well), the company has marketed the product as a music player. Still, Amazon’s Cloud Player has been reviewed as a relatively bare-bones operation, with limited format support and missing an iOS app.

Google’s service, Google Music Beta, arrived in early May to much fanfare, despite its invitation-only availability. Critics immediately attacked the service for unreasonably long upload times, as well as spotty streaming that causes songs to stop and start during play.

“Google is more of a storage and backup service,” said McGuire. “For Apple the idea is to make something more compelling than iTunes.”

Analysts predict that Apple, when it comes to market, will arrive with a feature-rich product that will not only allow for quick, painless uploads, but go beyond simply storing and streaming music, potentially even emulating aspects of young streaming services like Grooveshark which create playlists based on user tastes. Plus, any product Apple offers is likely to be connected to its iTunes music store, already the digital music leader with 66 percent market share. Amazon, in second place, has about 13 percent.

“Imagine if you’re accessing your collection in the cloud and you decide you want to complete an album, you can purchase it right there and it appears everywhere, anywhere,” said Paul Resnikoff, publisher of Digital Music News, a site that covers the industry, describing a feature Apple could potentially offer.

Apple has reportedly signed licensing deals with Warner Music Group, EMI Music, Sony Music Entertainment and is close to signing a deal with Universal Music Group -- the four major record labels in America.

But the biggest problem both Google and Amazon could soon face is that neither has signed any licensing agreements with the music industry. And the music industry is not pleased.

Sony Music released a statement saying it was "disappointed that the locker service that Amazon is proposing is unlicensed” that they hoped Amazon would choose to “resolve the situation quickly by agreeing to a license with us.”

Amazon countered that licenses were unnecessary, adding that storing customers’ music in the cloud was equivalent to letting them back up files on an external hard drive. Google, too, chose not to reach licensing agreements before setting up Music Beta.

The issue is not only that record labels might try to take both companies to court, but that the lack of a licensing agreement prevents their services from taking advantage of certain key features that could vastly improve user experience. Especially key is how licensing could affect the length of music uploads.

While Google and Amazon are seriously hampered by upload speeds that mean it can take an hour to upload two albums to the cloud, licensing agreements like those that Apple has reportedly reached, would allow Apple to use a “scan and match” technology. With “scan and match,” no upload is necessary -- instead, a user’s songs are checked against a database, and then streamed from a song catalog already in the cloud.

“In half an hour, you could have 30,000 songs uploaded,” said Resnikoff.

And, though Apple will be months behind, in one key aspect, they’re years ahead: With iTunes, Apple has been the largest music retailer in the country since 2008. The store reached its ten billionth download in January of this year.

Through iTunes, Apple has on file the credit card accounts of more than 200 million users, meaning that getting customers to sign onto a new music service would be far simpler than if it had to start fresh. What’s more, any customer who keeps music in an iTunes library, or has songs purchased from Apple in its proprietary MP4 format (which cannot always be played on non-Apple devices), would likely have a far easier time in the uploading process than if they had to convert files to MP3 format for Amazon or Google.

Of course, given that Apple’s cloud music service has still not been officially announced, it’s difficult to speculate as to what the product will actually turn out to be. Apple has experienced failure in the music space before, with flopped social network Ping.

“We’re kind of in this wait-and-see phase right now,” said Resnikoff. “We’ve seen these processes drag out before.”

Still, experts say that even if Apple’s service arrives late, it will be its competitors who will be left playing catch-up.

“Apple has the power. They can drop something on a marketplace and have a huge impact the next day. If you talk to someone on the street they’re not following this race but they are taking a lot of cues from Apple,” said Resnikoff “Apple said songs are 99 cents. They gave you the smartphone. The herd has been following Apple. They can heavily influence how people listen to music going forward.”