Google Lining Up Ducks for Online Music Shop
Oct 17, 2011 8:47 AM PT
Google appears to be working on an online music store that will compete with the established offerings of Apple and Amazon.
How competitive this online store will be is unclear, at least based on what is currently reported about its status. Google has held talks with Universal Music Group, Sony Music, EMI Group and Warner Music Group to license their catalogs, according to The Wall Street Journal, but only EMI Group is said to be close to inking a deal.
Google did not respond to the E-Commerce Times' request to comment for this story.
The Music Studios' Perspective
It is understandable that the music studios may be hesitating -- they are likely positioning themselves for the best possible terms.
Until recently, they have never had much pull in such negotiations, said Michael Goul, chair of the information systems department at the W. P. Carey School of Business at Arizona State University.
"Certainly they are better positioned now than when Apple launched iTunes several years ago," he told the E-Commerce Times. "With the growing competition -- from Amazon and now Google -- they should be able to extract much more value for their content."
Apple Showed the Way
Not that the music industry took a wrong turn when it caved to Apple's licensing and pricing requirements with iTunes several years ago, he continued.
Apple put this model on the map, Goul explained, leading the way to a viable and legal business model for online music.
Of course, now Google is benefiting from this -- probably to Apple's disgruntlement, Patrick Schwerdtfeger, author of Marketing Shortcuts for the Self-Employed, told the E-Commerce Times. "By launching a music store to compete with iTunes, Google is [moving into] an area that's already proven successful in the mobile marketplace."
With or Without You
It is possible Google may move forward with just an EMI license deal -- or without any at all. What form its online music store would take under such circumstances and how successful it would be are highly uncertain.
EMI has the smallest music catalog of the four big studios.
The music studios might be hesitant to send Google off without their blessings, though. The studios have been agitating against the latest twist in the online music model: cloud storage or locker services introduced by Amazon and Google that allow consumers to store their music in the cloud for use on whatever device they choose.
Neither Google nor Amazon has licenses from the music studios for this service. Google and Amazon are claiming that they don't need any -- that these lockers are meant for consumers to store legitimately purchased music. Music companies have implied, however, that these services are illegal because it entails making a copy of the original work for the cloud service, which they contend violates copyright law.
Both Google and Amazon reportedly tried to ink agreements with the music studios but failed to.
This is why any negotiations between Google and the music studios are probably unusually high-stakes right now, Goul said.
"Companies like Amazon and Google and Apple and Facebook are engaged in a major platform war right now," he pointed out. "They see the path to growth as adding new verticals and, hence, new customers. Music would be a major vertical for any of these companies, as Amazon and Apple have shown."
The platform provider that is able to offer the most robust selection of music, video and other content, along with cloud storage and provision features, is going to be the likely winner, added Goul. "Expect to see a dragged-out, full on war for control of this content."