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iCloud: Apple’s Perfect Storm?

A storm is coming soon. But will it turn out to be the tornado feared by Apple competitors, or merely a rainstorm that only cools things off temporarily?

Neither outcome would be unprecedented. Despite its many success stories, Apple is not an infallible corporation. While the iPhone and iPad 2 and even the iPod Touch have broken numerous sales records, Apple TV isn't exactly flying off store shelves. Last year, Apple faced one of its biggest challenges in company history: explaining why sales of the original iPad, Apple's long-awaited tablet, fell below expectations.

Last year, Piper Jaffray's Gene Munster presented a scenario in which Apple could become the leader of the cloud sector: via an a la carte cable service. In short, Munster believes that Apple will launch a new service that allows consumers to pick the channels they want instead of paying large monthly fees for networks they don't want or need.

To be clear, Munster was not specifically referring to the iCloud service (which had not been announced at the time) when he made this prediction. But if his forecast is at all accurate, doesn't it make sense that Apple would tie the cable service to its cloud?

The downside, however, is that Apple's cable service would (presumably) be delivered over the Internet, requiring users to go through Comcast, Time Warner or some other service provider in addition to Apple.



Other Options

Assuming that a la carte cable is off the table (at least for now), iCloud's selling point could come in the form of streaming music. While there are plenty of streaming music services already available, Businessweek recently reported on a few differences that could help Apple's version stand out.

“Armed with licenses from the music labels and publishers, Apple will be able to scan customers' digital music libraries in iTunes and quickly mirror their collections on its own servers, say three people briefed on the talks,” Businessweek writes.

“If the sound quality of a particular song on a user's hard drive isn't good enough, Apple will be able to replace it with a higher-quality version. Users of the service will then be able to stream, whenever they want, their songs and albums directly to PCs, iPhones, iPads, and perhaps one day even cars. And the music industry gets a chance at the next best thing after selling shrink-wrapped CDs: monthly subscription fees, à la Netflix and the cable companies.”
Businessweek paints an interesting picture. But while this might fall in line with Apple's history (the company likes to improve on existing products and services), it is far from a groundbreaking development.

More than likely, Apple will initially excel in cloud computing not for its innovation but for its polish, its marketing ability, and its impenetrable brand name. In 2010, if consumers had been given the chance to test cloud services from Apple, Google or Amazon, they would have gladly chosen Apple because they trust the name. It's that simple.



The Big Giveaway

If the user interface is as seamless as iTunes, iCloud will have an instant advantage in the cloud computing marketplace.

Beyond that, I suspect that the most important thing Apple will reveal next week is how much the company will charge for the service and how much it plans to give away for free. The latter is a key part of proliferating the idea and appeal of cloud storage. If Dropbox and Amazon CloudM didn't offer any freebies, they wouldn't be very popular.

Earlier this year, I proclaimed that for two years Apple would need to give away 100 GB of free storage to win over consumers who have already signed up for Dropbox and/or Amazon Cloud. Is this overkill? Perhaps. But if Apple first allows consumers to overload the cloud for free, it will be difficult for them to walk away when they're required to pay.

The trick, of course, is getting consumers to use that space. This could be another area where Apple excels, as its whole iTunes Store could be linked to iCloud and allow users to fill their iPhones with hundreds of gigabytes worth of music, movies and video games without needing hundreds of gigabytes of free space. Apple would then be able to manufacture smaller, cheaper, thinner and lighter devices knowing that consumers could use a cloud instead of physical storage.

This, however, is all theoretical. Regardless of the details Apple plans to reveal, the company still faces a ton of competition. Considering the legacy left by Apple's iDevices, the company is bound to do everything in its power to ensure that its first iService leaves a legacy of its own.

This is a cross-post from Benzinga.com
 
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