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Would Apple actually store individual copies of each song, or would they use compression at some level so that if two users uploaded an identical MP3 rip of a song, it would "compress" down to only one copy on their servers?

Would it even be legal to swap one MP3 rip of a song for another(e.g. "upgrade" everyone to the 320kbps iTunes rip), assuming the source material was the same?

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I assume this strategy works because they would be functioning as a Dropbox-like service where they just supply the hard-drive space in the cloud. Since space is pretty cheap (and Apple has a ton of cash anyways), it seems like the perfect glue that can connect all of Apple's offline products.

The way Lala currently works is that it matches songs you have in your library with their cloud library and only uploads and stores your copy if there's no match. I don't know if Apple would continue doing it that way but that's how it works now.

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