Neven Mrgan points out that iCloud would be quite odd if it only held items purchased from iTunes:
What would your iTunes-purchased music library look like? I had a suspicion mine would be pretty small and weird. There’s a quick and easy way to find out. In iTunes (the app. The Mac app. You know what I mean) go to File and create a New Smart Playlist. Set only one rule:
- Kind contains Purchased AAC audio file
That oughta do it. Now listen to nought but this playlist for a while. How does it feel? Does it feel a bit weird? Are you weirded out right now?
Out of the 1300+ tracks in my iTunes library, only 92 of them have been purchased from the iTunes Store. If iCloud only includes music files purchased from iTunes, it’ll probably be marketed as a way of backing up your purchased content, not as a streaming music service that holds all of your media.