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Wed 30 Mar 2011 06:04 PM

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Amazon faces backlash over 'music locker' service

Online site faces legal threat over plans for new music streaming service

Amazon faces backlash over 'music locker' service
Jeff Bezos, CEO of Amazon.com. The company plans to launch a music service that allows customers to play songs on a variety of devices

A new Amazon.com Inc service that lets customers store songs
and play them on a variety of phones and computers is facing a backlash from
the music industry that could ignite a legal battle.

Amazon's Cloud Drive,
announced on Tuesday, allows customers to store about 1,000 songs on the
company's Web servers for free instead of their own hard drives and play them
over an Internet connection directly from Web browsers and on phones running
Google Inc's Android software.

Sony Music, home to artists
such as Shakira and Kings of Leon, was upset by Amazon's decision to launch the
service without new licenses for music streaming, said spokeswoman Liz Young.

"We hope that they'll
reach a new license deal," Young said, "but we're keeping all of our
legal options open."

Amazon beat rivals Google and
Apple Inc into the market for such "music locker" services, which are
meant to appeal to consumers frustrated by the complexities of storing their
favorite songs at work, home and on their smartphones. Apple and Google were expected
to launch their services at the end of last year.

Shares of Amazon rose 3.1
percent to close at $174.62 on Nasdaq.

Music labels were informed of
the plans last week. Only later did Amazon address the issue of negotiating
licenses, one source close to the discussions said.

That executive called the
move "somewhat stunning" and noted that some within the media
industry said the service might be illegal.

"I've never seen a
company of their size make an announcement, launch a service and simultaneously
say they're trying to get licenses," said the executive, who requested
anonymity because the discussions were not public.

In 2007, EMI sued MP3tunes,
which offered a similar service. Consumers are allowed to store music files on
their own computers, but it is unclear whether they have that right when they
use remote storage services offered by cloud computing.

"The labels have
engaged in a legal terror campaign over the last 10 years using litigation to
try and slow technology progress," MP3tunes founder Michael Robertson said
of the music industry's latest reaction to Amazon's plans. MP3tunes is based in
San Diego.

Amazon's service is part of
its plan to be a bigger player in the digital content business and reduce its
reliance on the sales of CDs and books.

"They don't have
leadership in digital formats," said BGC Partners analyst Colin Gillis.
"The next big race is locker services -- that's what we want."

Gillis said he expected
Google to introduce a remote music storage service in May and for Apple to follow
suit in June.

Although Amazon's service
lets users listen to music from most computers or phones regardless of where
they bought the song, it will not work on Apple's iPhones or have an
"app" on that company's devices.

Amazon said customers would initially get 5 gigabytes of
free storage, enough for about 1,250 songs or 2,000 photographs. They can buy
20 gigabytes for $20 a year.

Alternatively, a customer can
get an upgrade to 20 gigabytes of free storage with the purchase of any MP3
format album from Amazon. New music purchases from Amazon saved directly to the
cloud service will not count against any storage quota.

Users can save music files in
MP3 as well as the AAC format, which is the standard for Apple's iTunes

Amazon is also offering Cloud
Player, which allows users to listen to music, download tracks and make


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