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iTunes, Digital Music Fly Into 'Cloud'

Stocks in this article: AAPL MSFT GOOG

BOSTON ( TheStreet) -- When companies such as Apple (AAPL) and Microsoft (MSFT) help the music industry ascend into the cloud, they may want to take their users' digital collections with them.

Streaming services including Pandora, Rhapsody and Spotify continue to gain traction among millions of listeners but, according to a report from Forrester Research (FORR), 58% of adults in the U.S. who used the Internet in 2009 still maintain a digital music collection.

With their numbers rising from 54% in 2008 and with a mean average of 1,200 songs in their collections, those consumers have amplified their say in the future of cloud-based music content, in which songs are provided to computers and other devices on-demand.

"If everything goes into the cloud and all you're doing is listening to Rhapsody, you're not going to give up the music you already have," says Sonal Gandhi, a Forrester analyst and lead researcher on the recently released report "The Growing Significance of Digital Music Collections." "You've spent time and money collecting the music and making those playlists, and that time and money needs to be accounted for."

Forrester's findings come as music-related companies suffer a drop in demand. Nielsen Soundscan said last month that digital-music sales were down in the first quarter, while the biggest music company in the world, Vivendi's Universal Music Group, had a 1.7% digital drop as part of a 13% plunge in overall quarterly music sales.

Against that backdrop, digital-music consumers are still in a state of flux, if not confusion. Though the online user has embraced the digital medium, Forrester finds that about 52% of his library comprises music ripped from compact discs and only 17% purchased online.

The options are complicating matters, as Google's (GOOG) Android, iPhone, Palm (PALM), Research In Motion's (RIMM) BlackBerry and Nokia's (NOK) Symbian smartphone operating systems all run their own music-management software. Meanwhile, Sony (SNE), Panasonic (PC) and Samsung hardware also have their own take on digital-music management.

Even when a cloud-based service does span several platforms, like Pandora or Sony favorite Slacker Radio, the attachment to a personal collection is often sacrificed for portability. It's the reason such streaming services have been successful in introducing subscription plans, but it also addresses a need that traditional online music stores aren't meeting.

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