Amazon’s Cloud Player Is Cool. But Is It Legal?

Posted on March 29, 2011

So today Amazon.com introduced a pair of new services.

The first, Amazon Cloud Drive, is a kind of “hard drive in the sky” that lets you upload files from your browser to Amazon’s huge data storage resources, and then retrieve them later from anywhere you have an Internet connection.

By itself, that’s not particularly interesting.  What makes it interesting, though, is the second new service, Amazon Cloud Player.  Cloud Player is a little bit of software, currently available for PC and Mac desktop computers and Android mobile devices, that retrieves all music files in MP3 or AAC format from your Cloud Drive account and lets you stream them from anywhere.  So you can upload your music collection to Cloud Drive, and then play it back anywhere you have an Internet or cell connection and a Cloud Player-capable device.

Pretty nifty!  And certainly attractive from the consumer’s standpoint.  But I have one question: how is it legal?

See, Amazon is not the first company to have had the idea of letting you establish an online “music locker” to let you access your music from anywhere.  The first was the pioneering music site MP3.com, all the way back in the late ’90s.  I wrote about my admiration for MP3.com’s innovative spirit 11 years ago (!), and their version of this service, called My.MP3.com, was a good example of that; it worked pretty much the way Amazon’s service does, only you didn’t even have to rip your CDs or upload any files anywhere to use it — you just put a CD in your drive to confirm that you owned it, and My.MP3.com loaded pre-ripped MP3s for that CD directly into your locker for you.

For 1999, this was pretty crazy advanced stuff.  So naturally the record labels took notice and sued MP3.com out of business over it:

Months of legal wrangling came to a head Friday when a federal judge issued a terse order holding MP3.com liable for copyright infringement, giving the recording industry an early win in its battle to stop the company from allowing consumers to stream music from a virtual database…

The lawsuit brought by the RIAA and filed in the Southern District of New York claims that MP3.com created an illegal database of 45,000 CDs, which the company purchased and uploaded on to MP3.com’s servers. The suit sought to shut down the service.

Users who sign up for the my.mp3.com service are able to stream music from that database to any device that can access the Internet.

The labels ended up getting awarded $54 million in damages, which was enough to drive MP3.com to sell itself at fire-sale prices just to avoid bankruptcy.

The judge’s opinion in the case that killed MP3.com, UMG Recordings Inc. v. MP3.com Inc., is interesting reading.   In it, Judge Jed Rakoff articulates several points that he found put My.MP3.com in the wrong.

The opinion basically boils down to whether My.MP3.com’s offering of pre-ripped MP3s constitutes “fair use.”  In other words, if you already own the physical CD, would that make it legal for My.MP3.com to stream you a digital copy of the music on that CD?

Citing the Copyright Act of 1976, Judge Rakoff identifies four tests that have to be passed for fair use to apply:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

Judge Rakoff found that My.MP3.com passed none of these four tests, so their fair use defense was inoperative.  But when you read the opinion, it’s hard not to think that Amazon’s services would fail those tests too, even though they require you to rip your own MP3s rather than ripping them for you.

Let’s take a look at each point to see what I mean.  On the first point, “purpose and character of the use,” Judge Rakoff wrote:

Defendant does not dispute that its purpose is commercial, for while subscribers to My.MP3.com are not currently charged a fee, defendant seeks to attract a sufficiently large subscription base to draw advertising and otherwise make a profit. Consideration of the first factor, however, also involves inquiring into whether the new use essentially repeats the old or whether, instead, it “transforms” it by infusing it with new meaning, new understandings, or the like…

Here, defendant adds no new “new aesthetics, new insights and understandings” to the original music recordings it copies… but simply repackages those recordings to facilitate their transmission through another medium. While such services may be innovative, they are not transformative.

On the second point, “nature of the copyrighted work”:

The creative recordings here being copied are “close to the core of intended copyright protection,” and, conversely, far removed from the more factual or descriptive work more amenable to “fair use.”

On the third point, “amount and substantiality”:

It is undisputed that defendant copies, and replays, the entirety of the copyrighted works here in issue, thus again negating any claim of fair use.

And on the fourth point, “effect of the use upon the potential market”:

Defendant’s activities on their face invade plaintiffs’ statutory right to license their copyrighted sound recordings to others for reproduction… Moreover, plaintiffs have adduced substantial evidence that they have in fact taken steps to enter that market by entering into various licensing agreements.

Now think for a moment about Amazon’s service in these terms.  Set aside how the MP3s get into the online music locker (you ripping them vs. someone else doing so on your behalf) and think about what happens when they are played back.  Is the purpose of the service commercial?  Yes.  Does it “transform” the works in question rather than simply “facilitat[ing] their transmission through another medium”?  No.  Are the works in question “close to the core of intended copyright protection”?  Yes, if those served by My.MP3.com were, these certainly are.  Does it replay “the entirety of the copyrighted works” rather than an excerpt? Yes.

So far it seems like a slam dunk for the music labels.  But I initially figured that the key difference would be in the final point — whether Amazon, unlike MP3.com, did anything to address the potential impact of their service on the market.  In other words, My.MP3.com was illegal because tiny MP3.com made the CDs available without paying a licensing fee for that music to the copyright holders, but Amazon’s service wouldn’t be, because they would have made those licensing deals first.

But then I read in the Wall Street Journal today that Amazon didn’t make a licensing deal with the copyright holders for their new service:

Amazon is still working out key legal issues related to the service, these people added. Most notably, Amazon has yet to secure content licenses from at least some major record labels and movie studios.

One major music company, Sony Corp.’s Sony Music Entertainment, expressed dismay at Amazon’s plans, echoing concerns of others in the industry. “We are disappointed that the locker service that Amazon is proposing is unlicensed by Sony Music,” a spokeswoman said Tuesday evening.

So there goes that defense, too.

And that’s what puzzles me.  Amazon is not a dumb company.  I assume that they reviewed the My.MP3.com debacle closely before deciding to move ahead with Cloud Drive/Cloud Player. But the only difference between their new services and My.MP3.com, as far as I can see, is that My.MP3.com ripped the CDs for you, while Amazon expects you to rip them yourself.  That distinction alone, though, seems to be an awfully weak reed to hang a major new product on.  If they’re not the ones ripping the CDs, perhaps Amazon can argue that they’re not the ones infringing copyright; but by facilitating the online playback of the music ripped by others, Amazon is surely assisting in that infringement.  And since they offer automatic loading of songs purchased through their MP3 Store into your locker, it’s possible that even this thin argument doesn’t apply, if there are any albums in that store for which the MP3s in question were licensed for one-time download but not for continual streaming.

So what gives?  Is Amazon just hoping that the world has changed enough in eleven years that an idea that crossed the line in 2000 won’t cross the line in 2011?

Or is there a wrinkle here that I’m missing?

UPDATE (11PM): Ars Technica asks the same question, and gets a response from Amazon on the record:

“Cloud Player is an application that lets customers manage and play their own music. It’s like any number of existing media management applications. We do not need a license to make Cloud Player available.”

That’s Amazon spokesperson Cat Griffin’s response to questions over whether the company’s new music storage and playback services require licenses from the record companies to operate. Amazon seems to insist that since users are uploading and playing back their own music, the original download licenses still apply and no new licenses are necessary—a seemingly logical conclusion that the record industry disagrees with…

“[W]e do not need a license to store music in Cloud Drive,” Griffin added in an e-mail to Ars. “The functionality of saving MP3s to Cloud Drive is the same as if a customer were to save their music to an external hard drive or even iTunes.”

They appear to be daring the labels to sue them.  Veeeery interesting…

UPDATE (March 30): TechCrunch asks Michael Robertson, the founder of MP3.com, what he thinks of Amazon’s new service:

Robertson’s take was particularly interesting, not just because he’s been an occasional TechCrunch guestblogger but mainly because his opinion on the news covers an important aspect of yesterday’s announcements that hasn’t been given enough attention by media outlets in my opinion: the unavoidable legal part of the equation.

“Amazon’s entrance into the business is enormously significant because it will dictate whether Apple or Google enter into a license for their own service or go the unlicensed path. If the labels take no action against Amazon, then expect Apple and Google to follow in their footsteps”, said Robertson.

“While the upload process can be a bit time consuming, that’s a small one-time price to pay for sidestepping expensive licensing bills and onerous restrictions. Apple will surely go this route if Amazon suffers no repercussions.”

Interestingly, TC notes that Robertson’s current company, MP3Tunes, offers a streaming music locker service of its own.  I’m going to check it out; given Robertson’s long history of innovation in the online-music space, I’m very interested to see what he’s up to these days.

UPDATE (August 1, 2012): Amazon makes peace with the music labels. And Michael Robertson’s new venture, MP3Tunes, gets sued out of business.