Apple Inc. (Nasdaq: AAPL) has reached agreements with three major record labels to let users of its new music service access their song collections from handheld devices via the Internet, people with knowledge of the deals said.
Apple will accommodate the data and networking demands of its planned cloud services with a new $1 billion data center in western North Carolina. Chief Financial Officer Peter Oppenheimer said at the company’s annual shareholder meeting in February that the facility will be a hub for the iTunes and MobileMe services
The new iTune offering will let users store content on Apple’s servers and access it using the Web, rather than loading songs into a device’s memory, said the people, who asked not to be identified because the plans haven’t been made public. The plans could be previewed as early as Apple’s developers conference, set to begin June 6, the people said.
Apple, the largest U.S. music retailer, follows Google Inc. (GOOG) and Amazon.com Inc. (AMZN) in letting consumers stream music from the so-called cloud instead of downloading it to a hard drive. Unlike competing products, Apple’s cloud music service won’t require users to upload online collections, two people said. Record labels are counting on cloud services to reignite sales of digital tracks, which have stagnated in recent years.
Apple has reached licensing accords with Sony Corp. (6758)’s music division, EMI Group and Warner Music Group, the people said. Universal Music Group, the largest recording company, is close to a deal, another person said. The company also would need to reach agreements with music publishers, which control different rights than the labels.
Natalie Kerris, a spokeswoman for Apple, declined to comment, as did representatives of the music labels.
Whether Apple will charge a fee for the cloud service and when it will become widely available to the public aren’t yet known. The music plans may be part of a broader overhaul of Apple’s MobileMe platform to let users store pictures, contacts and other files on Apple’s servers and access them from the Web, two of the people said.
An expanded MobileMe service may help Apple as it competes for customers with Google, whose Android operating system is used by rival handset and tablet makers such as Samsung Electronics Co. and Motorola Mobility Holdings Inc.
Cnet.com reported earlier that Apple had agreements with Warner Music and EMI.
Amazon.com and Google didn’t secure licensing deals before opening their cloud music services.
The cloud service is an extension of talks Apple had been holding earlier with music companies about rights that would let users download songs they have already purchased to multiple devices.
Labels Under Pressure
Record labels are seeking ways to jump-start music sales as millions of people flock to rival services, including Internet radio company Pandora Media Inc., where users can listen for free from anywhere with an Internet connection.
Licenses with the music labels may help Apple make its services more efficient by eliminating the need to store separate copies of a song for each customer. Instead, multiple users could stream tracks from the same copy housed on the company’s server.
Apple’s annual Worldwide Developers Conference will be held next month at Moscone Center in San Francisco. In past years, Chief Executive Officer Steve Jobs has used the event as a showcase to unveil the newest versions of the iPhone. This year’s event isn’t expected to include a new iPhone, two people familiar with the plan said in April.
When announcing the event, Apple said it will be focused on software, including the new version of the iOS mobile software for the iPhone and iPad tablets, as well as the latest Mac operating system, called Lion..
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