there's still more free space than iCloud and drop box,plus it's more compatible with office and is much easier to share things. Watch the video on the front page? You'd know what this is all about if you did. Zune pass still offers more than the others $10/month for unlimited streaming,downloads and music videos.
iCloud isn't the same type of service that SkyDrive is. SkyDrive is an online locker. iCloud is first and foremost a backup solution. You can't store stuff on iCloud like a drive. That's not how it was designed. It was designed chiefly to hold app data and data for Apple Applications and services (iWords files, iCloud Mail, iTunes media, etc.) as well as backup apple devices. Completely different. iCloud can get away with a lower limit because they can safely assume no one will be uploading a 400MB 1080p video they just took with their iPhone to iCloud. Microsoft cannot make such an assumption with SkyDrive.
Apple has 32/64GB SKUs for all their mobile devices, so they don't really need a solution like this with iOS having WiFi synching and the fact that iCloud will propagate a ton of backed up data across all their form-factors, anyways... People who need more space will simply get a bigger iTouch/Phone/Pad since having space on your device is almost always superior to cloud storage due to connection issues and things like that.
Even then, when you use Live Mesh for backups/synching it's only 5GB so they're only on par with Apple there but Apple is a bit more elegant in how it's integrated into the OS and their apps (the way it propagates changes across devices in real time, etc.). Even PhotoStream has limitations on how long it will keep a file on there and how many files it will keep before it starts deleting the oldest ones first.
A 16 second 720p video I took with my HD7 is over 40MB. If the size baloons at a fairly consistent rate, it means 2.7min of footage from that camera = 400MB which is not a lot and it's over 5% of 7GB. Pictures from a 5MP camera at full resolution average over 1MB. Better cameras average better photos at higher quality and the files are generally heavier - especially at higher megapixel counts (8 or 12).
Google Drive is primarily for Docs. Google already has the infrastructure and services to offload other types of data to other services within the same Google Account and integrated decently thereof. Picasa/Google+, YouTube, Google Music, etc. so the fact that they only offer 5GB isn't much of an issue. Again, SkyDrive is different, and since Microsoft doesn't own such services they cannot make those types of assumptions.
The only services that have to really worry about how much space they give are those like SkyDrive, Box.net, and DropBox. There's a reason why Box ran promotions on Android and iOS to give people 50GB space and DropBox is giving away space in their referral promotion.
Additionally, Zune pass is not portable so it's not necessarily a huge incentive to come to WP7 now that they deleted the free 10 songs a month perk. People on other platforms can just bring their present streaming solutions (like Spotify) over with them, or stay on another platform and still continue using those. Zune Pass was huge when services like Spotify weren't in certain countries and they gave away music for free. I now I deactivated mine and won't ever go back without that perk since it's not portable and I can use Spotify on any platform I choose.
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