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I am trying to understand iCloud backup and how the data from a 64 GB iPod might fit in a 5 GB account.

I just updated to iOS 5 and the latest iTunes. Now, when I sync, I get a choice to backup to iCloud (instead of backing up to the computer). I see it offers me 5 GB of space, but my as stated my iPod is 64 GB.

Does this mean I need to pay for 64 GB of space to be able to use iCloud? What is 5 GB going to do for me?

Also, I have an iPhone. Is it 5 GB per device or 5 GB per Apple ID? I use the same Apple ID on all of my devices.

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up vote 2 down vote accepted

A fairly good article to check out in this case is iCloud: Backup and restore overview

You receive 5 GB per iCloud account, but you can have separate iCloud and iTunes Store accounts setup, thereby sharing music and apps, while keeping the backups apart.

From the article: What is backed up:

You get unlimited free storage for:

Purchased music, TV shows, apps, and books

You get 5GB of free iCloud storage for:

Photos and videos in the Camera Roll
Device settings (for example: Phone Favorites, Wallpaper, and Mail, Contacts, Calendar accounts)
App data
Home screen and app organization
Messages (iMessage, SMS, and MMS)
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Does this mean that it is not really storing your purchased music, but just a pointer to the music itself in the iTunes store? If so: what will happen if that music is discontinued in the iTunes store? – GEdgar Nov 12 '11 at 14:16
@GEdgar - note that normal backup doesn't back up purchased music as part of the "backup" process. The system allows you to "transfer" or "re-download" one time and nothing in iCloud seems to change this. I would hope it's like apps where even once something is no longer for sale, I as a purchaser still have available to me from the servers the re-download that was promised in the terms of sale. I'd say a refund would be due if you never had that chance to get the purchase to a computer for a proper backup. – bmike Nov 12 '11 at 15:19
If it is discontinued I am fairly sure you will need to contact iTunes Store support for a refund as bmike suggests. This was true before iCloud, so I assume it is true today – ConstantineK Nov 13 '11 at 17:26

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