How Apple’s iCloud Could Squeeze Billions More From Tightfisted Music Lovers

According to a new survey by RBC Capital Markets, an astounding 30% of iPhone users said they were somewhat likely to drop $25 per year for Apple’s iTunes Match service.

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Seventy-six percent of iPhone users surveyed said they were likely or very likely to use Apple‘s forthcoming free iCloud service, according to a survey by RBC Capital Markets. But even more remarkable is the number of iPhone users that said they were somewhat likely to drop $25 per year for Apple’s iTunes Match Service: 30% indicated they were willing to pay for the privilege of organizing (and laundering) their music in Apple’s cloud. And that’s good news for labels that signed on with Apple.

The music business is undoubtedly in a nosedive–worth half of what it was a decade ago, with album sales dropping 12.8% in 2010. But considering estimates that the number of iPhone users could reach as high as 100 million users by the end of 2011, Apple’s cloud service could unearth a huge new source of revenue for the industry. If just 30% of those users pay the $25 annual fee, as RBC’s survey suggests, that would yield roughly $750 million in incremental revenue per year. Apple has agreed to give 70% of any revenue from its cloud music service to the record labels.

Apple finally unveiled its long-anticipated cloud sharing service earlier this month. Called iCloud, the service allows users to sync all their apps, emails, photos, and more online, accessible from anywhere–download Angry Birds on your iPad, for example, and it’ll automatically show up on iTunes and your iPhone. But what’s garnered the most attention is Apple’s iTunes Music Match, a premium service that scans all your music and replaces random files with fully licensed, high-quality versions that match any of the 18 million tracks in iTunes’ library–and they’re stored in Apple’s cloud, ready to be shared between all your Apple devices sans USB chords and slow sync times.

It’s a feature not even Amazon and Google could pull–the tech giants reportedly went ahead with their cloud-based music services without licenses from the major record labels, meaning in order to keep music in the cloud, you’ll have to own it and upload it yourself–a process that is snail-paced and clunky. Apple’s service, on the other the hand, takes only “minutes not weeks,” according to Steve Jobs, and could yield the company billions of dollars in revenue in the coming future. The report out today proves just how potent iCloud could be for Apple’s mobile music offering.

But it’s not just iPhone users who are interested in the service–plenty of consumers would love to share their music between desktops and laptops and iPads. According to most recent figures, Apple boast 225 million credit-card backed accounts on iTunes. If only 30% of iTunes users opt in to Match, that’d bring in nearly $1.7 billion annually.


About the author

Austin Carr writes about design and technology for Fast Company magazine.