Did Apple just clean the record labels’ clocks again?

Cloud Now that we know the basic contours of the new iTunes in the cloud from Apple we can make some guesses as to why it took so long for Apple to nail down deals with the record labels. As it did when it when it first persuaded the labels to lock themselves into a 99 cent price for downloads, from which it took the labels years to extricate themselves, Apple once again seems to have done some fancy negotiating. And as it did in the beginning, it again seems to have managed to limit the labels’ financial participation in the iTunes value chain to one, rather smallish revenue pool.

Consider:

  • With the new Automatic Download feature, any song you’ve ever purchased or will purchase through iTunes can automatically be downloaded to all of your iTunes devices (up to 9 devices) –no manual syncing required — at not extra charge. As Steve Jobs put it in his WWDC keynote Monday (via), “This is the first time we’ve seen this in the music industry — no charge for multiple downloads to different devices.” That adds a lot of value for Apple by giving people yet more reason to keep buying Apple mobile devices (yes, I know there are jury-rigged ways to sync iTunes with an Android device but we’re talking about non-geeks here), but unless there’s some hidden price increase coming for iTunes downloads, I don’t see where the labels get anything out of that added value.

Instead:

  • A separate feature called iTunes Match will scan your hard drive and mirror your entire music collection, including content you ripped yourself, in the cloud, relying on iTunes’ existing database of 18 million songs. For that, you pay a flat $24.99 per year, regardless of the number of songs, a portion of which, presumably, is shared by Apple with the record labels.

It’s not hard to see what the label’s think they’re getting out of the deal: They’re finally getting paid for all that music you ripped from your CD instead of purchasing again in digital form. Since it’s not clear that the application will (or even could) distinguish between tracks ripped from a CD and those you might have downloaded illegally from LimeWire, moreover, the labels will finally be getting a piece of the value you “stole” from them through piracy.

Yet at $25 a year, it may not turn out to be that big a pool of money. For one thing, you don’t have to pay it to use the other features of iTunes in the cloud, including the automatic download feature. And as Jobs himself waspishly noted in his keynote, it’s half the price of what Amazon plans to charge to store a mere 5,000 songs in your cloud locker for a year. If you have 20,000 tracks in your collection, storage with Amazon’s Cloud Player will run you $200 a year, compared to $25 a year with iTunes Match.

In exchange for a cut of that action, the labels (and presumably the music publishers) have apparently agreed to drop their long-standing insistence on being paid for each copy. That’s clearly a very good deal for consumers (and by extension for Apple). Whether it turns out to be as good a deal for the labels in th long run remains to be seen.