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Why Apple Is Negotiating Licensing Deals for Its Cloud Music Service
Rumors have been flying for weeks that Apple is deep in negotiations with record labels and publishers to secure the licensing rights necessary to provide a cloud-based music service. But why does Apple need to negotiate anything? Doesn’t Apple already have the right to sell music through the iTunes music store? To understand what’s going on, we need to take a quick look at how music licensing works, and why Apple is trying to work with the music industry.

Without going into too much history on the subject, what makes music copyright a bit unique when compared to other media is that the law recognizes two co-existent copyrights: the underlying musical composition, and the recorded performance. The law requires permission, usually in the form of a license or royalty fee, from both parties to sell a song for download, play it on the radio, play it in a bar or restaurant, and so on. Licensing is handled by publishers and record labels, and blanket licenses for certain uses are provided by performing rights organizations (PROs) like ASCAP, BMI, SESAC, SoundExchange and the Harry Fox Agency.

While certain uses, like “synchronization” rights to use an audio recording in a movie or on TV, or “master use” rights to put a recording on a compilation album require a specific agreement, a CD comes with an implicit license for the buyer to play the music for their own personal use. It does not allow public performance. However, the American music industry long ago recognized that it would be in their best interests to simplify licensing for certain public performance uses, like recording a song someone else wrote on your record, using a short sample on a hip-hop record, playing a CD in a bar or restaurant, or playing a song on the radio. The rates for these uses are set by congressional statute. These statutory licenses allow radio stations to play music without negotiating a specific license for each and every song with both the publisher and the record label.

In a twist of historical circumstances, U.S. copyright law treated radio airplay differently in that it required the payment of publishing royalties for the songwriter, but not performance royalties for the recording artist or their label. It was thought that this arrangement would be fair because radio airplay would help market the record and drive sales for the recording artist. Internet radio, which emerged in the mid-90s, challenged the status quo because it could lead to a future where all music would be streamed over the Internet, and only songwriters would get paid and recording artists would get nothing.

So for just over the last 15 years or so, the music industry has been trying to work out how to craft an arrangement that compensates everyone — writers, publishers, recording artists and record labels — in the face of changing technologies that demolish laws and contracts crafted in the days of AM radio. The current law requires non-interactive digital streaming services like satellite and Internet radio to pay both publishing and performance royalties, but traditional broadcasters like AM/FM radio still only pay the publisher. Interactive online services (like Rhapsody, Rdio, or Spotify where the user picks the songs) are not allowed to use statutory licenses, and have to negotiate their own deals with publishers and record labels.

For Apple, the issue is determining if their new cloud music service changes their role from a music retailer, to that of a broadcaster, or an interactive streaming service. Should they have to pay a royalty each time that song is played or streamed over the Internet? Can they pay the statutory license fees, or do they have to negotiate with the labels?

Amazon has chosen not to reach an agreement with publishers and record labels. Google, rumored to have been rebuffed by the labels in their negotiations, is now in a similar position. They both argue that their services are simply cloud storage for digital downloads for which the consumer has already paid a one-time permanent license. By their argument, there is no difference between using a digital media player to access a file stored in the cloud, and accessing a file on a computer hard drive over your home network.

Apple is going straight to the publishers and the record labels to work out a deal that will allow them to offer the music service they want to provide at a cost that makes sense. As rumors describe it, Apple’s service would not be an interactive subscription to any music (such as Rhapsody or Rdio), but rather on-demand access to only music you’ve purchased.

One of the sticking points is reported to be the “scan and sync” feature to avoid unnecessarily uploading copies of songs from the user’s music library if Apple already has them on file. It worries record labels that Apple might scan an illegal copy of that song on the consumer’s computer that was never paid for, and then “sync” that song to provide access to a legal copy on Apple’s service. The rumored solution is that Apple is willing to pay some amount for every “synced” song, no matter if it was originally purchased on the iTunes store or not. Despite the licensing cost to Apple, it does save Apple from paying for the bandwidth usage for everyone to upload gigabytes of music, and it saves the cost of storage to keep 10 million copies of Lady Gaga’s latest single.

While it’s difficult to predict what will happen, it does seem likely that Amazon and Google have made Apple’s offer more attractive to the record labels. Even in the complicated world of music licensing, any royalty, even if smaller than the labels desire, is infinitely better than no royalty at all.

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What Voice Recognition Technology Could Mean for Apple — and All of Us
Voice recognition has long been billed as a kind of holy grail of mobile computing, but the reality is that the technology has been awkward, inaccurate and often unusable, resulting in misdialed phone calls and incomprehensible messages. So it's no surprise it's failed to garner much usage in mobile.

Apple may be positioned to change all that, though, with the iOS 5 platform it will outline at next week's WWDC in San Francisco. The company has reportedly been in discussions to license Nuance's effective voice technology – dubbed Dragon – and may integrate it with the new version of iOS 5. Apple could make the technology available to developers as a built-in API in iOS 5, handing app creators a valuable new tool. Such a move would not only give voice recognition a much-needed push into the mobile mainstream, it would give Apple the chance to once again transform the way we interact with our phones. Here's why:

1) Voice recognition technology is finally ready for prime time. Dragon powers Nuance's FlexT9 for Android, a dictation app that sells for a mere $5 and enjoys a four-star user rating after more than 1,100 reviews. And there is no shortage of compelling use cases, from accessing a navigation app while driving (when your hands should be on the wheel) to dictating lengthy messages rather than typing on a miniature keyboard.

2) Apple knows how to educate the consumer. Voice recognition has come a long way, but using it still isn't always intuitive. Google's technology, for example, requires users to say the words "period" or "comma" if they want to add punctuation to their messages. But Apple's marketing genius lies in showing consumers how to use technology: The first iPhone commercials were essentially tutorials in how to surf the Web, access email and find nearby businesses on the handset. A similar campaign could illustrate how to do all those things and more by talking, not typing.

3) Apple is a master of the user interface. The touchscreen was nothing new when the iPhone came to market; Apple's true innovation was in simplifying the technology with an interface that made it easy for users to navigate their phones. The company could do the same with voice by integrating Dragon closely with iOS, making it easy to send messages or navigate the Safari browser by speaking. And the legions of iOS developers will surely find innovative new ways to leverage voice in everything from messaging to gaming to social networking.

For more thoughts on how Apple could leverage voice recognition technology to change the way we use our phones, see my latest Weekly Update at GigaOM Pro (subscription required).

Image courtesy Flickr user Lazurite.

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How To Control Keynote Presentations on Your iPad From Your iPhone
One of the best new features in Apple’s updated iWork suite for iPhone and iPad is the ability to control a Keynote presentation on your iPad (probably ideally connected to a larger screen) using your iPhone. Please note that the following requires both devices to be on the same local Wi-Fi network, rather than working with a device-to-device Bluetooth connection, and that you must also have the Keynote Remote ($0.99) and two iOS devices.

Here’s what you need to do to get it working:
1. Open the Keynote app on the iOS device you want to use to display your presentation.
2. From the Tools menu, select Settings.
3. Tap on the Remote setting and turn Enable Remotes on.
4. Open the Keynote Remote app on the iOS device you want to use to control your presentation.
5. Tap on New Keynote Link to display a passcode.
6. From the Keynote app on the other iOS device, choose the device name running your Keynote Remote app under the Remote setting, and enter the passcode.
Since you can connect your iPad 2 or iPhone 4 directly to a projector or monitor via SVGA or HDMI, carrying around a laptop computer in order to conduct presentations is no longer necessary if you have a couple of iOS devices. It’d be nice if Apple built Keynote Remote functionality into the Keynote iOS app itself, but a dollar is a small price to pay to go completely mobile and (mostly) wireless with your presentations.

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Apple Could Copy Twitter But it Won't, and Here's Why
Blogger and entrepreneur Anil Dash mused Wednesday in a blog post that Apple could make Twitter, or at least a roughly similar service that provides real-time cross-platform messaging. He points out some barriers standing in the way of Apple achieving such a goal, but a bigger one comes to mind: Apple likely isn’t interested in making something even remotely like Twitter.

Unlike Google, Apple hasn’t expressed much interest in competing in the social media arena with the likes of Facebook and Twitter. It has stuck its toe in the water with services like the Ping social music network built into iTunes, and the Game Center achievement tracker and leaderboard that ships with iOS, but these efforts have largely been met with lukewarm response from both the media and users.

Not to mention that Ping and Game Center represent very specific approaches to social media that share little in common with the likes of Twitter. Namely, both are designed to fuel sales, and do little else besides. In other words, Ping and Game Center are marketing efforts first, and social tools second. Twitter, on the other hand, is a social network in search of a successful and sustainable business model. Apple isn’t interested in creating something first, and then finding a way to make it profitable later. Consider that Jobs took the idea of the mouse from the Xerox PARC research collective and remade it based on the concept of turning it into something that would sell and make money.

With that in mind, isn’t it then conceivable that Apple could take the idea of Twitter or real-time messaging and make it a profitable asset? Possibly, but probably not. Dash describes a team within Apple building a messaging service complete with “first-rate native clients on every important platform.” Apple, unfortunately, has never been interested in any platform other than its own. Even when it does branch out, as with iTunes, the ultimate goal is to drive sales of its own iOS or iPod devices. Plus, as most Windows users will tell you, the iTunes experience on that platform is far from “first-rate.”

In fact, the very virtues that make Twitter a valuable asset to users are traits which Apple has shown a reluctance to embrace: Twitter is web-based, which Ping (and even probably the iTunes store) should be but isn’t; Twitter, while not necessarily “open,” is still a lot more open than Apple tends to be, and Dash’s request for a lightweight API for developers to build web apps wouldn’t fly with Apple’s walled garden approach.

In the end, it adds to a paradox, in that if Apple were to make Twitter, it would probably look a lot like Ping (i.e., inextricably tied to Apple product and baldly promotional in nature), which means it would lose a lot of its value to users, which means it wouldn’t be Twitter. And ultimately, Apple knows where its core strengths lie, and which is in providing the tools that others depend upon to build networks, and not in building them itself.

Can Apple make a Twitter? It is technically capable of doing so, yes. But the company’s institutional culture make the chances of it ever doing so very slim indeed.

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Tapjoy Says Apple Isn't Willing to Budge on Incentivized Install Ban
Tapjoy, whose app promotion campaigns have been halted by Apple in new and updated iOS apps, has come up with a new solution that it hopes can help it avoid Apple’s recent ban. The company has proposed a simple fix that allows Apple to identify app referrals from Tapjoy’s ad network so it can prevent those downloads from being counted by the App Store ranking algorithm.

Tapjoy and other mobile advertising companies that promote incentivized installs were thrust into the spotlight in April when Apple began rejecting apps that included pay-per-install campaigns. The promotion allows an app developer to get paid when one of its app users downloads a separate app in exchange for virtual currency or some reward. The practice has drawn the attention of critics who said companies like Tapjoy were using it to game the rankings system by boosting apps in the top ranks. Apple didn’t publicly explain its actions but cited a section of the developer program license agreement that prohibits developers from manipulating user reviews or chart ranking in the App Store.

Tapjoy CEO Mihir Shah said he reached out to Apple three weeks ago and offered to include a referral URL for the App Store when a user chooses to download an app in exchange for virtual goods. That would allow Apple to identify that the download came from Tapjoy and not count it in the App Store ranking algorithm. Shah said Apple wrote back a couple days later saying it had no time to discuss the issue.

This follows another attempt Tapjoy made to limit the influence of its incentivized installs. Just days after the ban went into effect, Tapjoy also offered to limit pay-per-install campaigns to prevent any one app from leaping into the top 25 of the rankings through this form of cross promotion. Apple did not go for it. It’s left Shah confused about Apple’s stance on pay-per-install, which appeared to be about preserving the integrity of the app store rankings.

“If this is about charting, we have a very simple solution,” said Shah. “But I'm a bit confused because it seems to be about something I’m not aware of more than pure charting.”

What Shah believes is clear is that the Apple ban is hurting developers, who have relied on cost-per-install campaigns to help drive downloads and build awareness of their apps. A new survey of 496 iOS developers by Tapjoy underscores the impact of the ban with 48 percent of developers saying they’re received user complaints about the lack of incentivized installs and 54 percent of developers who say they’re making less money now because of the ban. Also, 60 percent of developers said they derived more than 20 percent of their revenues from pay-per-install campaigns.

These results show how much many of Tapjoy’s developers came to rely on the pay-per-install model. I’m not sure developers should have been putting so many of their eggs in this basket. But Shah argues that the model has been good for up and coming developers, helping them get their apps noticed in the crowded App Store. With the cost of acquiring users about three times cheaper than more traditional display network campaigns, cost-per-install was an important tool for developers, said Shah.

Larger publishers and bigger developers also used the model to help inject some predictability into their businesses. By leaning on pay-per-install, companies were able to justify their investment in mobile apps because they were able to better predict their performance. But Shah said the biggest impact is for users, often younger people and students, who were able to participate in games without access to a credit card by downloading another app.

Shah said prior to Apple’s change, Tapjoy was interacting with 30 million daily active iOS users and 175 million monthly users on all mobile platforms, generating 1.5 million conversions a day. The company, like its iOS developers, has seen its business decline on iOS though it is making up for it with big growth on Android. Shah said he’s not clear why Apple still doesn’t want to work with Tapjoy and others even if they end their influence on the rankings. But he noted that Apple and others who operate mobile ad networks are benefiting from the enforcement change as developers turn to them for app cross promotion.

“I think the facts speak for themselves; ad inventory on iAd is going up as a result of (Apple) indicating to the market they're not OK with developers using Tapjoy, W3I and Flurry.”

I’m not sure Apple is trying to drive developers to iAd. There could be other reasons why Apple isn’t interested in implementing Shah’s solution. But he does raise some interesting questions about whether this ad model deserves a right to exist with limitions in place. Developers are struggling to get their apps noticed and have been using cross promotions display ads in apps. Cost-per-install is attractive because it’s cheaper and if Apple limits its influence on App Store rankings, is it so different from mobile display ads?

Ouriel Ohayon, co-founder of AppsFire, an app discovery service which competes with Tapjoy, however, says the goal of developers should be to drive engagement, something Tapjoy hasn’t been able to prove. But Shah said cost-per-installs are more like coupons, helping users try an app. That’s a legitimate goal for developers, he said. The question appears to be moot on iOS for the time being because Apple is showing no willingness to change its ban.

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The Heist Changes the Game With 500K Downloads in One Week
iPhone puzzle game The Heist has been sitting pretty at the top of the App Store charts basically since its release last week. In that time, it’s seen over 500,000 downloads, and racked up more than $300,000 in revenue for its developers. In a blog post Wednesday, tap tap tap, the studio behind the app, shared details about how it reached such dizzying heights.

Voices, the last chart-topping offering from tap tap tap sold 300,000 copies in its first month of availability, and Angry Birds, which The Heist managed to knock from its long-standing perch, was a flop for its first three months on the App Store in English-speaking markets. So how did The Heist skip the line, so to speak, and zoom to the top of the charts in such a short period?

Tap tap tap principal Phill Ryu sees it as the result of promotion, adding value for gamers, speaking directly to the audience, generating word of mouth, and being a fresh face among a crowd of old familiar mugs. To say that The Heist is an overnight success is to ignore the fairly extensive pre-launch promotional campaign, which began in the release of Twitter for Mac 1.0. In January, people who bought the MacHeist nanoBundle 2 last year were given exclusive access to a secret area within the official Twitter for Mac client that held clues about The Heist. Then, a week prior, the team put up a teaser page (featuring a multi-touch puzzle when viewed on iOS devices) and a new discussion forum to help build buzz.

The app itself is attractive, too, not only because it’s a great, well-designed game, but also because it offers buyers a uniquely attractive value proposition. Specifically, The Heist costs only $0.99 (the going rate for chart-toppers in the App Store), but it offers gamers who complete it a code redeemable for another game that normally retails for $9.99. It feels like you’re getting something for nothing. Ryu says that they considered charging more, but opted to aim lower in order to build their audience as quickly as possible. Making well over $300,000 (total sales revenue minus Apple’s 30 percent cut for distributing the app in its App Store) in one week says they probably made the right decision.

Direct marketing also worked for The Heist: 500,000 fans opted to receive email updates about the product, and tap tap tap used an iPad 2 giveaway to incentivize fans to spread the word on Twitter. Blog coverage picked up quickly based on the buzz generated through other means, and on the reputation of the MacHeist brand as a quality software bundle deal provider for OS X.

The Heist also had two more key elements going for it. First was an air of mystery, as the prize remained unknown for a short time after its release, and as people seemed surprisingly reluctant to spoil the reward for others. Second, The Heist wasn’t an Angry Birds title, or another variant of longtime App Store chart-toppers Fruit Ninja, Tiny Wings and Cut the Rope. Just by virtue of injecting some new life into the relatively stagnant pool of offerings on Apple’s charts, The Heist made itself attractive to buyers.

I asked Ryu if he could sum up the key to The Heist‘s success in one succinct statement, and he did so by comparing the app to a blockbuster movie from last year:

The Heist was the Inception of the App Store this summer. Fanboy-driven, buzz from a plot twist, a high-risk gamble in a relatively niche game genre, heist-structured, more mentally taxing than most, and I guess, unlocking a game in a game. It’s a fairly unconventional hit, I think.

Both thematically and metaphorically, I think that’s a pretty spot-on comparison. Can’t wait to see where these guys go next with App Store innovation.

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Why Apple Won't Be Flying Solo on Maps Anytime Soon
Former Google CEO and current Executive Chairman Eric Schmidt said Tuesday that Google recently reached a deal with Apple that will ensure Google search and maps products continue to appear on the iPhone. Speaking at the D9 conference put on by AllThingsD, Schmidt revealed that Google and Apple continue to be good business partners in some regards, even as their rivalry makes working together in other areas harder.

Apple has been rumored to be preparing its own in-house maps solution for the iOS platform that powers the iPhone, iPod touch and iPad, based on job listings and acquisitions it has made over the years. Apple bought Placebase in 2009, a company which offered mapping services with added layers of commercial and public data sets, including employment demographics and other stats, and was looking for someone to “radically improve” its on-device maps as recently as March.

While Apple may be keen to see what it can do over and above what’s already provided by the native Google Maps app on iOS devices, it’s a long way off from killing off the partnership altogether. Consider this: who else even comes close to Google when it comes to mapping products? Microsoft Bing? MapQuest? No matter where you look, Google offers considerable advantages, not the least of which is Street View, which is mimicked, but not matched, by some of the competition. Google also has a class-leading local search database integrated within the Maps app, which makes it easy to find directions.

Apple would have to put a lot of time and effort into its own iOS Maps app before it could even approach what Google is offering, even considering its acquisitions. And Apple won’t replace Google on its platform before its own offering exceeds what it’s replacing; a feature update that seems like a considerable backslide isn’t the type of consumer experience Apple would deliver.

Apple may be using hires and IP purchases with the ultimate goal of providing maps for its own devices, but it’s more likely that those resources are dedicated to bridging the feature gap between Maps for Android and Maps for iOS. Free turn-by-turn navigation, for instance, has yet to turn up on iOS devices, despite it already having been available for Android for quite some time. Apple could also be using the idea that it is working on its own in-house solution to put more pressure on Google to bring feature parity to the iOS Maps app. Google, after all, reportedly highly values its search relationship with Apple, of which Maps is a big part, especially when it comes to local mobile search.

If, as Schmidt says, a new deal has been reached between Apple and Google, we could see more maps features crossover to iOS 5 from Android at WWDC next week, but don’t hold your breath for a completely Apple-sourced Maps app. At least not yet.

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Wednesday, June 1, 2011

TheAppleBlog · Apple and iOS News, Tips and Reviews (7 сообщений)

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