Amazon.com Inc. (AMZN), the biggest online retailer, is negotiating with record labels over licensing rights related to music storage on its new cloud service, two people with knowledge of the discussions said.
The company unveiled a service this week that lets consumers store digital music on its servers and play tracks on computers and smartphones running Google Inc. (GOOG)’s Android. Amazon started the service “without a license,” said Brian Garrity, a spokesman for Sony Corp. (6758)’s music unit.
Amazon, which says it doesn’t need new music-license rights for the service because storage in the so-called cloud is no different from keeping music on a personal computer’s hard drive, is talking to the labels to reach an agreement, said the people, who requested anonymity because the talks were private.
Digital music libraries can be uploaded to Amazon’s new Cloud Drive, with 5 gigabytes of memory available free, the Seattle-based company said on March 29. Users who purchase an album from Amazon.com will be upgraded to 20 gigabytes of Cloud Drive space, which can be used to store music, photos, videos and other digital files.
By licensing the music, Amazon wouldn’t have to store separate copies of the music for each customer, instead letting multiple users stream tracks from the same copy kept on Amazon’s servers.
The unveiling of the service by Amazon places it a step ahead of rivals including Google and Apple Inc. (AAPL), which aim to start similar services. Record companies have struck licensing deals with existing music-streaming sites, such as Spotify Ltd., Rdio Inc. and Music Unlimited, to help counter the effects of piracy and a drop in purchases of compact discs.
Amazon’s service now requires each customer to store individual copies of purchased tracks. A license would make the service more efficient by allowing users to access songs from a central database, according to the Wall Street Journal, which reported the talks previously.
Amazon rose 71 cents to $180.13 at 4 p.m. New York time on the Nasdaq Stock Market. The shares are little changed this year.