Google’s Music Strategy: Past, Present and Future

Google may have lost to Apple in its bid to acquire Lala, a music service that grabs users’ digital music collections and hosts them in the cloud, allowing them to add to those collections for a mere 10 cents per song. But it would be nuts to count out Google in the race to replace iTunes’ pay-per-download model with a cloud-based music service that is easy and attractive enough to convince non-music-buyers to open their wallets.

The tech behemoth has traditionally steered clear of music, reportedly because co-founder Sergei Brin isn’t a music fan — and on at least one level, Google is about addressing its co-founders’ needs. (The somewhat-botched launch of Buzz, which Brin apparently loved, is one example of this).

Apple has owned the digital music market since it essentially created that market with the launch of the iTunes music store in 2003. Since then, the company’s one-two punch of iTunes and iPod has fended off all comers.

But we’re approaching a major inflection point in the short history of digital music, a time when we stop administering our own music collections on local hard drives, and instead build them online, where they can be accessed on a multitude of connected devices — smartphones, netbooks, tablets, computers, televisions, bookshelf systems and cars — without the tedium of managing each and every file transfer by hand.

And, piece by piece, Google is slowly laying the groundwork to be a player in that space.

What Google Has Done

So far, Google’s approach to music has been very un-Google: Send users to the walled gardens of Lala, iLike, Pandora and Rhapsody. Former SeeqPod CEO Kasian Franks told us that lots of illicit music search services use elaborate Google queries to find MP3s on public servers, so Google could have built a music service or vertical search tool that seeks out those files. (Even in China, where copyright views are generally laxer than they are in the states, Google has chosen to compete with the popular Baidu music search engine by linking to a licensed music source that includes a watermark with each download.)

Instead, Google has been playing nice with the music industry — not only with Google music search, but with Vevo, the music video site owned in part by Sony Music and Universal Music Group. Vevo is already working well, tallying 35 million visitors and 13 billion views in December, the first month in which the service was available.

Of course, hardly anyone is going to Vevo.com to view these videos — instead, they’re going to Google’s YouTube. By pushing music searchers toward licensed music services and collaborating with the major labels on Vevo, Google has set the stage for a more aggressive move into the music market, likely to be aided by the labels’ long-standing resentment about Apple pretty much owning the digital music space.

What Google Is Doing

Even before it launches a dedicated cloud-based music service, Google might already be the top cloud-based music company in the world, in a sense, due to the popularity of music streams on YouTube. (It’s even possible to download full MP3s from YouTube without paying a cent, using Dirpy or other tools.)

Following its failed bid (WSJ subscription required) to acquire Lala, Google is considering purchasing a U.S. and Israeli company called Catch Media, as reported by CNET. Like Lala, Catch has the ability to suck a user’s music collection up into the cloud and serve it to them on a multitude of devices. (Melodeo’s nuTsie — an anagram of iTunes — offers a similar feature and could also be a Google acquisition target.)

Catch Media differs from Lala in that it evolved from a system developed to allow customers of one bank to withdraw money from another bank’s automated teller machine — whereas Lala used to focus on helping people trade used CDs online. If Catch Media figured out how to let you withdraw money from a competing bank’s ATM, perhaps it can figure out how to make all of our music playing devices access the same online music collection — also for a small fee. The same way we pay (albeit grudgingly) to access our money from a third-party ATM, we could pay to access our music collection on a connected device whose manufacturer lacks a relationship with the online music service, dissolving the bond that glues Apple’s hardware to its music store.

How Google Could Unseat iTunes

If music is broken, perhaps Google can fix it (see search, e-mail, document collaboration, long tail advertising, maps, phones, and so on). And Apple’s widely publicized dropping of DRM about two years ago means that most of the music iTunes users have on hand can be transferred just as easily to a Google cloud-based music service as an Apple one. The door is wide open for Google to poach iTunes users, especially if it does the following:

Lower prices, even if it means losing money initially. Lala currently sells streaming songs for 10 cents apiece — a price Apple might be uncomfortable with, seeing as it generally sells music for ten times that. Google has no such cannibalization worries, so it should price streaming music at 10 cents or even lower. As with Gmail, which is free until you hit the storage limit, or YouTube, which lost money for the first few years, Google would have to be willing to eat a loss in order to win in the long term.

Make cloud-based music collections portable, so that if someone is dissatisfied, they can take their music (or rather, the data representing it) to another cloud-based service. So far, there’s no big database that would allow people to grab their tunes and split. However, Google scored very well in our quick data-portability survey, which leads us to believe it would do the same for music. If any company would be willing to make its music subscription transferable, it’s Google, considering its history in other areas.

Charge consumers micropayments to access large cloud-based collections, but not small collections. Users won’t try it if they have to pay upfront, but the labels won’t condone the service unless it charges users something to access their collections, hampering Google’s ability to sell music as part of the plan. As with Gmail, this could be a low yearly fee for collections above a certain size.

Do something in the living room. Forrester Research analyst Sonal Gandhi, whom I will interview later Monday at a NARM Salon in Manhattan, claims the reason half of the U.S. population doesn’t buy digital music is because over ten years after companies first began offering home-networked audio hardware, the category has yet to take off. If Google’s going to beat Apple (which already has Apple TV and Airport Express) to the cloud, as far as music goes, the living room will have to be part of the equation. Alliances with companies such as Boxee and television manufacturers would help a great deal in this regard.

Continue to leverage search. Vevo is successful because people look for videos on YouTube, while Lala and iLike probably owe no small part of their traffic to Google’s practice of placing them at the top of its search results. Meanwhile, Apple only recently created web pages for iTunes albums, and I’ve never seen one appear in a Google search result. Search gives Google a tremendous advantage in the race against Apple to own the cloud-based music space.

Source: Wired

It’s November 2009 and we’re nearing the end of a decade. It’s been a tumultuous time of change for many industries, much of it driven by the Internet. With that in mind, over the coming weeks ReadWriteWeb will look back on the defining Web trends of the past 10 years. From the dot com boom, to the nuclear winter after, to the passion and enthusiasm of the pre-Web 2.0 innovations (such as RSS and podcasting), to the highs and hype of Web 2.0, to the current era of the real-time Web, to the near future of the Internet of Things. We’ll explore all of this and more.

We’re starting with online music. No industry, except arguably the newspaper one, has been rocked (pardon the pun) more by the Internet than the music industry.

Napster & Kazaa: Online File Sharing

The online music decade started with Napster, a music file sharing service created by Shawn Fanning that operated between June 1999 and July 2001. Napster enabled people to freely share MP3 files over the Internet; however it quickly ran into major legal trouble. Napster was the subject of lawsuits in 2000 by touchy metal band Metallica and others. It was eventually shut down by court order, after several major record labels went after the service.

After Napster’s demise, a P2P application called Kazaa became the most popular service for music file sharing. But it too eventually succumbed to record industry attacks.

Curiously, both Napster and Kazaa were recently reincarnated as law-abiding services. After years of re-launch attempts, Napster was acquired by Best Buy in September 2008 and was born again in May 2009. Meanwhile Kazaa turned into a legit music subscription service in July this year.

iTunes / iPod: Digital Music Goes Commercial

While Napster and Kazaa tried to skirt around the commercial imperatives of music, like paying artists, Apple took on the record industry in an entirely legal way. In January 2001, Apple launched a digital music player for music callediTunes. Then in April 2003, the iTunes Store was launched. It offered the ability to buy songs for 99 cents each, which had a major impact on the music industry.

Soon after Napster’s demise in 2001, Apple launched what was to become a revolutionary device in the music industry. The iPod was launched in October 2001 and it became the most popular portable music player since the Sony Walkman in the 1980s.

Fast forward to 2009 and iTunes continues to evolve. In January Apple announced that iTunes would go DRM-free. In September 2009 Apple launched version 9 of iTunes, which included a Genius-like recommendation feature for apps and ‘iTunes LPs’ - a feature that brings liner notes and artwork to digital albums.

MySpace: Music & Social Networking

MySpace was launched in August 2003 and soon became a popular hangout for local bands, especially indie rockers. MySpace provided a way for those bands to promote their music and reach a wide network through social networking.

As ReadWriteWeb’s Sarah Perez wrote last month, it was a virtuous circle for MySpace. The bands’ presence on MySpace “began to attract a young, hip crowd of users who were interested in following pop culture, and, in particular, the up-and-coming artists they discovered while browsing through the network. Only eight months after its launch, MySpace began to experience exponential growth, as its users created profiles and friended others who would then, in turn, invite more users to join the social network. Thanks to the “network effect,” MySpace soon became the place to be online. Everyone was there.”

However by 2008, MySpace had ceded the social networking crown to Facebook. In 2009, MySpace is once again trying to reclaim its heritage as a music service. In October MySpace launched ”Artist Dashboards” and integrated its music video vault with recent acquisition iLike.

Pandora & last.fm: Online Music Discovery

Online music services have flourished in the ‘web 2.0′ era, when the ability to find new music and share it with others via the Web became increasingly sophisticated.

Two services in particular stand out. One is Pandora, a free online music discovery service. Pandora was founded in 2000 and continues to grow, despitevarious legal issues over the years. As ReadWriteWeb’s Frederic Lardinois noted earlier this year, Pandora derives its revenue from targeted audio advertising in its music streams and affiliate sales through Amazon’s MP3 store and iTunes.

Last.fm is another online music discovery service. It was founded in 2002 and was sold to CBS in 2007. It continues to innovate in 2009, for example in May this year last.fm announced combo stations, allowing a user to create a station with up to three artists or tags.

Conclusion

This post and series was inspired by one of my favorite blogs and podcasts, NPR’s All Songs Considered. They’re currently looking back at the decade in music and much of the discussion is about how the Internet helped define it.

And it’s true, when you think of music at the end of 2009 you think of iTunes, Pandora and last.fm - MySpace even. The record industry is still coming to terms with these and other changes.

Source: NY Times