Apple Inc. (Nasdaq: AAPL) plans to unveil its new iCloud service at its Worldwide Developers Conference (WWDC) Monday – and Chief Executive Officer Steve Jobs will make an appearance to headline the event.
In an extremely unusual pre-announcement Tuesday, Apple said Jobs will be on hand to introduce the company's new cloud services offering, which will allow users to access music and other media over the Internet. Jobs has been absent most of the year since taking medical leave in January for the second time in two years, except for an appearance in March to introduce the iPad 2 and a few recent interviews.
Jobs usually keeps information on new products tightly under wraps until they are officially unveiled, but Apple posted a conference preview on its Web site that mentioned the iCloud offering.
The iCloud service is basically a cloud-based version of iTunes, providing consumers with an easy way to create and listen to music libraries online without having to upload all their files. Apple's iCloud will scan iTunes libraries and then store the contents in the cloud, allowing other Apple devices to stream the files. It eliminates the hassle of users having to sync their gadgets.
To avoid the uploading step, Apple secured deals with recorded-music companies Warner Music Group Corp. (NYSE: WMG), Sony Corp.'s (NYSE ADR: SNE) Sony Music Entertainment and EMI Group Ltd., and is in talks with Vivendi SA's (PINK: VIVHY) Universal Music Group. These deals allow Apple to offer a "scan and match" service, meaning iCloud will analyze a user's music library and grant access to songs it recognizes, without having to manually transfer files.
Apple will share 70% of iCloud revenue with involved music companies, a source familiar with the matter told The Financial Times.
Music industry experts say Apple still has to finalize deals with music publishers that control the rights to the songs' words and melodies. Trouble with negotiations could delay iCloud's launch date.
Google Inc. (Nasdaq: GOOG) and Amazon.com Inc. (Nasdaq: AMZN) rushed to release cloud-based services ahead of Apple, knowing their rival's digital music stronghold would be hard to compete against. Apple is the world's largest music retailer, with more than 200 million iTunes accounts. But without music-company deals, Google's Music Beta and Amazon's Cloud Drive require users to first upload their music and files to the Web, making Apple's scan-and-match system far superior.
Google and Amazon's cloud media services are also unavailable on the iPhone, a drawback for those loyal to Apple's star smartphone.
The new iCloud service is an expanded and revamped version of Apple's previous cloud-computing offering, MobileMe. The feature allows users to share information between devices, but has struggled to gain customers because of its $99 annual price, compared to similar free services offered by Google.
Analysts and consumers have anticipated this type of product offering from Apple for years. The first tip came in 2009, when Apple bought tech start-up Lala, which allowed users to play music they own over the Web. Apple shut down Lala shortly after the purchase, sparking rumors it was gearing up for a cloud-based iTunes launch.
Pricing for the iCloud will determine its popularity, even if its features are better than competitors'.
"The key question here is pricing, with the only sensible model for a cloud-based service from Apple being subscription-based," Charles S. Golvin, an analyst with Forrester Research Inc. (Nasdaq: FORR), told The New York Times.
To handle its new cloud media services, Apple built a billion-dollar data center in North Carolina, which it will discuss more at the conference.
"This may be the most powerful data center ever, outside of government," Richard Doherty, an analyst with Envisioneering Group, told USA Today. "It will be able to handle millions of streams per minute without any network hiccups."
Apple usually remains very tight-lipped on product news before a conference, but analysts think the company wanted to set the stage for an event focused on unveiling software, not hardware.
Besides introducing iCloud, Apple will also announce new versions of software that powers its computers and cell phones: Lion, the eighth major release of the Mac operating system, and iOS 5, the next version of Apple's mobile operating system that runs its iPhone, iPod Touch and iPad.
"It feels like the first time in quite a while that there hasn't been any hardware associated with an upcoming Apple announcement," said Golvin. "It's all software related."
At the last three WWDCs Apple released a newer version of the iPhone, so many expected a similar announcement this year, until focus turned to iCloud this week.
"The real message is: Don't expect to see the iPhone 5 next week," said Piper Jaffray Cos. (NYSE: PJC) analyst Gene Munster.
Analysts expect Apple to release a newer iPhone in the fall of this year. The next model is expected to include a chip from Qualcomm Inc. (Nasdaq: QCOM) that allows it to work with more cell phone carriers.
Many attendees of this year's conference, scheduled to start Monday morning in San Francisco, will use this opportunity to gauge the health of CEO Jobs.
Jobs was diagnosed with a rare type of pancreatic cancer in 2004 and had a liver transplant in 2009. Previous health-related scares from Jobs have sparked a decline in Apple's share price. Many investors and analysts have questioned how well the company would perform without its leader.
Despite Jobs' recent medical leave, Apple's stock is up about 7% this year.
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- The Financial Times:
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- USA Today:
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