Apple's iCloud might not even have a cloud component

Apple (NASDAQ:AAPL) confirmed today that it would announce a cloud-based storage service called iCloud at its WorldWide Developer Conference (WWDC) next week--that was it for the details. A short press release offered up a preview list of new product nuggets--which also included the latest Mac OSX feline, Lion, and the new iOS 5—but a list that conspicuously lacked an iPhone. So unless you’re the type that gets excited about operating system updates, the big news at the show likely will be Apple’s new cloud service.

Apple is expected to soon launch a new cloud music locker that integrates closely with iTunes, meaning the announcement of a competing service to Amazon’s (NASDAQ:AMZN) cloud music player or Google’s (NASDAQ:GOOG) still beta-trial service (Unfiltered: Examining the network impact of Google Music Beta) won’t come as a shock. But what’s up in the air is how much more Apple will add to the service than just music.

iTunes carries a lot more than music files. Many iTunes customers have built up a vast store of the movies, TV shows and other video bric-a-brac, which Apple could just as easily store in its cloud along with their ripped CDs and purchased songs. Such huge digital files would kill the storage limits in the cloud lockers out there now (Amazon offers 5 GB for free and charges annual fees for extra storage), but then again, Apple wouldn’t need to store them.

Unlike Amazon and Google, Apple already has licensing deals worked out with the film and TV studios and record labels, and presumably, Apple is expanding those deals to include cloud distribution. Apple wouldn’t have to store anything per se; it would just keep the master files it already has in the iTunes store and allow customers anywhere access—or at least anywhere access from an Apple device—to that streamed content.

In effect, Apple wouldn’t have to launch a cloud storage service—it could just launch an Internet streaming service that builds upon its extant digital content distribution framework. You can already transfer music and movies between your iPhone, iPad, iPod and Mac. You can stream it over your home network to Apple TV. iCloud could extend that capability to the Internet at large, moving the master repository for music and video files from the PC or Mac to a common hosted library.

Imagine going to a friend's house, opening his iTunes on the PC, entering your iTunes password and suddenly having access to your entire music and video collection. There is no special cloud player to download, there is no time spent manually moving your collection into the cloud, there is no need to separately manage cloud and PC libraries. Apple could feasibly pull this off with an iTunes update across all of its products and an additional registration form. That’s a powerful concept. Amazon and Google’s cloud music services aren’t difficult to use, but negotiating two music collections is annoying. One-touch synchronization and iTunes' vast install base are tools Apple will use to the fullest.

Ripped music from a personal CD collection may not play well with this master file strategy. Apple doesn’t have a way of verifying the CD or that you paid for it, so it might have to store that content in a personal cloud—unless it reaches some particularly choice agreement with the labels. But it’s safe to assume that every song, album, TV episode or film you bought on iTunes is verifiable. When talking about HD video files that’s huge. A single feature-length movie would account for hundreds of individual albums worth of music content. Why store 100,000 individual personal copies of Pirates of Caribbean when you only need to store one?

Apple can still offer a hefty cloud service centered around user-generated content. In fact, it already offers one--MobileMe. I would expect Apple to revive that storage platform next week incorporating it into iCloud.

That leaves the final issue of payment. If Apple can use master files and faces no additional storage costs, it could offer unlimited access to its music and video collections at no cost, undercutting Amazon on its storage fees (we’re still waiting to see what Google does). But Apple may charge anyway. It probably has to cut the labels and studios in on the service, and running a server infrastructure supporting millions of simultaneous high-bandwidth streams ain’t cheap. But Apple might just charge because it’s Apple. You get a premium, easy-to-use service, you pay a premium price. That’s always been Apple’s MO.