Yeah yeah, Apple’s new iCloud service doesn’t support streaming, but it’s all about significant, yet incremental, updates right? Besides, it’s not as if iCloud is completely forgettable. On the contrary, what Apple introduced at WWDC a few weeks ago is pretty darn compelling. We can only hope, of course, that the company has learned from its MobileMe mistakes and won’t let anything officially go live until they know without a doubt that everything will be up to par with the user experience Apple is renowned for providing.
One of the more intriguing aspects of iCloud is iTunes Match, a service whereby Apple will scan a user’s entire music library and match it in the cloud, subsequently allowing them to download higher quality versions of those songs back to any other Apple device. It makes no difference if a user’s songs were ripped from CD’s or if they were illegally downloaded from Limewire, Aimster, Kazaa, or going way back, Napster. As long as you’re willing to spend $24.99/yr, you’ll be covered.
There’s been a lot of back and forth about how successful iTunes Match will be, and while we’re skeptical that it’ll be a huge money maker, a recent survey conducted by RBC analyst Mike Abramsky suggests otherwise.
Approximately 76% of respondents indicated that they plan on taking advantage of Apple’s free iCloud service while 30% of respondents indicated that they’re either very likely or somewhat likely to use Apple’s upcoming iTunes Matching service.
Applying those results to Apple’s installed iOS user-base, Abramsky theorizes that we might see 150 million users taking advantage of the free iCloud service and 60 million users signing up for iTunes Match. If Ambramsky’s prediction is accurate, and admittedly its quite speculative at this point, he writes that Apple will take in about $1.5 billion/yr in gross revenue which translates out to about $450 million in profit/yr once the record labels get their piece of the pie.
Now that’s an exceedingly optimistic estimate, especially for a company like Apple’s’ that hasn’t generated a lot of confidence in its cloud-based initiatives.
Still, the media reaction to Ambrasky’s survey misses the larger point. Much like the iTunes Music Store, iCloud isn’t being utilized as a cash cow for Apple. On the contrary, it’s providing a service to users to lock them into Apple hardware, or at the very least, convince them to purchase Apple hardware.
Ambarasky himself points out:
Because it stores user data, iCloud, along with iTunes is expected to enhance loyalty and stickiness of Apple’s customers, helping defend against threats from Android, helping grow a defensible install base of users who continually upgrade to next generation Macs, iPhones, iPads, and iPods.
That said, Apple is most likely more concerned with users flocking to iOS devices for free iCloud support than it is in churning a profit with iTunes Match.
Extrapolating the survey results across Apple’s iOS ecosystem, RBC notes that Apple could see 150 million users on its free iCloud services with 60 million of those also participating in iTunes Match, a figure that would see Apple pulling in an extra $1.5 billion per year in gross revenues. With Apple reportedly keeping 30% of iTunes Match revenue with the rest being passed on to music labels and publishers, Apple would see about $450 million in revenues from the program.