Google Is Competing With Itself With New Music Service

Many people in the music industry have been waiting with baited breath to hear something about YouTube’s plans for a paid music subscription service, and when news circulated that the company was planning an announcement for Tuesday, it seemed like they’d get it.

Nope.

Instead, Google announced that it would begin offering a free Pandora-like digital music service as part of Google Play. The move left many at the New Music Seminar in New York suggesting Google had ramped up its competition with itself — Google Play vs. YouTube — even as its main rival, Apple, is about to make a major push into streaming music for the first time.

Google launched subscription service Google Play Music two years ago. For $10 a month, users can access a library of 30 million songs, as well as songs they have downloaded, from any device. The company doesn't release subscriber numbers but says the number of users has doubled over the past 12 months.

A company spokesman said millions of people had begun enrolling in the service but turned away once they had to enter credit card information. Adding a free Internet radio service is a way to give people a reason to stick around and get accustomed to the service before deciding to pay. (Google Play has always offered a free trial, but people had to enter a credit card number before enrolling and often don’t bother.) It also gives Google a range of services roughly akin to Apple’s offering, spanning Internet radio, a streaming library, and a download store.

Musicians haven’t always been happy about the way that streaming services use free music as a way to attract customers. After publicly feuding with Spotify last year, Taylor Swift recently shamed Apple into paying royalties for the free trials it is offering as part of Apple Music. With Google, there is no negotiation. The company is using digital radio licenses where rates are set by a court instead of negotiating directly with copyright holders. This is the same way that Pandora does business, with no small amount of grumbling from the traditional music industry.

But all this feels like a sideshow. Google's main music service is YouTube. People watch tons of music videos on the site without ever paying a dime, a consistent sore spot for record companies and music publishers who see the service as a deterrent to signing up for paid subscription services. That seemed set to change when Google announced Music Key, which would provide ad-free music on YouTube, offline viewing, and a subscription to Google Play Music. This would mean more money for record labels and publishers at a time when they are desperate to replace the revenue they are losing as people turn to streaming over downloads. Google released a test version of the service in November and recently said it would likely launch this fall. A company spokesman declined to give any details about its plans.

Richard Stumpf, the chief executive of Atlas Music Publishing, said at the New Music Seminar that he's confused about Google’s strategy. “Every day I'll get a license request from YouTube music, which is basically Google Play,” says Stumpf. "There’s two different teams, there’s two different worlds. They don’t talk to one another.” He thinks the company should just fold both offerings into one service under YouTube's brand.

Tom Silverman, the CEO of Tommy Boy Entertainment, compared Google’s digital music strategy to the dysfunction of Jay Z’s much-derided streaming service, which lost its chief executive this week. “It feels like Tidal,” says Silverman of Google’s strategy. “They’re back to the drawing board trying to decide what will work.”

Source | Financial Chronicle | 25 June 2015