The idea of cloud service has been debated for a few years now and seems to be gaining steam with Google's latest venture. Amazon also has launched a cloud service of its own. The fact that the royalty rates have been squared away for streaming audio makes this much less of a struggle for the content creators, although Google has launched its service without the backing of record labels, which isn't surprising because the major labels always seem to be the last ones to the party.
Cloud music seems as though it could work in the digital era where everyone owns a smart phone, but some say it is not the best option. That's certainly the case according to Bob Lefsetz. In one of his recent letters about Google's new service (Click here to read the full letter) he makes a strong case for the subscription business model. He believes that the music industry must adopt the subscription model because it has proven effective, siting Netflix's success despite much content being unavailable for streaming. He believes the future is in subscription and not up the in the clouds.
I think the future is maybe a little bit of of both cloud and subscription. From a storage and accessibility standpoint, cloud services make the most sense. Combining storage capability of cloud with the cost effectiveness of subscription would strike a balance between the businesses and consumers. I believe the subscription model would go over more smoothly if major labels can work out a deal with internet/phone providers to attach a "music cost" into the cable and telephone packages they sell.
Hopefully something will finalize soon, as far as the economics of the music industry is concerned. Maybe then we can focus on what's really important...THE MUSIC! In the mean time check out this video about Music Beta: