Amazon vs Apple: The race for the future of music

A new 'virtual jukebox' lets you play your own songs wherever you are. Jerome Taylor on why it makes iPods look so last century

Ever since the dawn of the internet, music fans have dreamt of a mythical celestial jukebox where every song ever produced would be available at the click of a button.

Now Amazon has sneaked ahead of arch rivals Apple and Google by becoming the first major internet company to unveil a music-streaming service – allowing people to store their music online and listen to the tracks on any computer or smartphone.

So-called "cloud music", where music libraries are stored in cyberspace rather than on computer hard drives, is the new Holy Grail of the digital music industry, as technology companies race to entice consumers in a world where the CD has been all but abandoned.

Yesterday, Amazon quietly released Cloud Player to its American customers in a move that has taken much of the music blogosphere by surprise. Numerous smaller companies have already released their own start-up cloud players in what is still a niche, yet rapidly growing, market. But Amazon's offering is the first time that one of the major tech goliaths has jumped into the business. Google and Apple are thought to be developing their own cloud players.

Cloud music players are often described as "digital lockers" where music listeners can place the music they own on a remote server. Users can then access their music library anywhere in the world as long as they have a fast internet connection.

It means that gap-year students travelling abroad or employees in offices can listen over the internet to the same CDs that are sitting on their bedroom shelves at home. Amazon's service, which is not yet available to British customers, starts by giving subscribers 5GB of free storage space, enough to hold 1,000 songs. Those who purchase an album through the company's digital music store will be given a further 20GB free for the first year and will then be expected to pay $20 (£12.50) a year to continue using the service.

You can then access your music on any computer or Android mobile phone. Given the ongoing hostility between Amazon and Apple – the two companies are currently engaged in a legal spat over who owns the phrase "App Store" – iPhones will not be able to sign up to the Amazon cloud player.

Music fans might find it somewhat galling to pay a company to store their music for them, but according to Mike Butcher, European editor of the TechCrunch technology blog, it won't be long before everyone is listening to music this way. He said: "Most of us have growing libraries of digital music.

"But if our hard drives crash or our computers are stolen we risk losing everything. Storing your music on a cloud means you'll always be able to access it." As internet speeds continue to get faster, many companies are trying to persuade people to store their data with them to free up space on their hard drives. The practice also gives the companies a lucrative insight into their customers' spending habits.

But the emergence of cloud players is very likely to lead to yet another clash between software companies and record labels over royalties and the thorny question of who owns the rights to digital music files. Figures released this week show that global recorded music sales fell by $1.3bn last year as digital piracy continues to take its toll on the music industry. Record label executives are determined to rake back profits through music providers like Apple, Amazon and Google. But cloud players could soon become a new sticking point.

"There is going to be a monumental ding-dong over all this in the coming years," Steve Mayall, editor of the consultancy Music Ally, said. "Amazon can probably see which way the wind is blowing and have decided to roll out their service, but I'm sure there will be some legal battles on the horizon."

Uploading music files to a digital locker is still viewed as legally ambiguous. Although someone who has bought a track has the right to listen to it, do they then have the right to share it on another server? And would a cloud provider like Amazon be liable for pirated music that is played through its servers? Although many record labels have turned a blind eye to these ambiguities, a handful of companies are being sued over such issues.

Amazon has defended its cloud system as being no different to using a web-based service to back up files. "We don't need a licence to store music," Craig Pape, the company's director of music, said. "The functionality is the same as an external hard drive."