Apple, Amazon, Google Agree to Royalties on Cloud Service

Apple Inc. (AAPL), Amazon.com Inc. (AMZN) and Google Inc. (GOOG) reached an agreement with record industry representatives to set royalty payments for their cloud services.

The Digital Media Association, which represents technology companies, the Recording Industry Association of America and the National Music Publishers Association reached an agreement to set rates for 2013 to 2017. The contract will be submitted to the Washington-based Copyright Royalty Board for ratification, the groups said in an e-mailed statement yesterday.

The pact creates five new categories of royalty payments that include services such as Apple’s iCloud, Amazon’s online music locker and Google’s free cloud service. The accord also extends, with little changes, existing royalties for CDs and downloads.

Musicians and the record industry are obtaining new forms of payment as technology companies develop alternative ways for consumers to purchase and listen to music. The sides last reached an agreement in 2008, only after a court ruling set royalty rates for ringtones, physical CDs and downloads.

“This is the first time we have settled without going to trial,” Lee Knife, executive director of the Digital Media Association, said in an interview. “It shows a closer alignment between the parties. The future of the industry is on online services and the more services we allow to develop, the better off the whole industry will be.”

Royalty Rates

Last year, Apple, Google and Amazon started cloud services that allow users to access, purchase and store music from Internet-connected devices -- a development that wasn’t covered by the earlier royalty agreement.

By creating and setting royalty rates, more companies may begin offering and experimenting with music services, Knife said.

Digital Media Association also represents Microsoft Corp. (MSFT), MySpace Music, Viacom Inc. (VIA)’s MTV Networks, Slacker Inc. and Nokia OYJ. (NOK)

“In next five years, people will think of new models we didn’t have the prescience to think of at this time,” Knife said. “It’s an exciting time.”

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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