Google Music's Worst Enemy? Google

9:12 AM PST 05/19/2011 by Mike McGuire
Kat Shady

A top industry analyst offers five ways the Web giant can work with Hollywood to challenge Apple.

When Google announced its new cloud-hosting music service May 10, high expectations suddenly sagged. Yes, consumers will be able to store online music collections on Google's servers and access their libraries via Android devices, but the Google Music service is not dissimilar to Amazon's new Cloud Drive -- just without the MP3 download store and the ability to buy traditional CDs.

To paraphrase my dog, "Yawn."

One of the new service's most glaring weaknesses is that it launched without the support of all the major record labels. And public kvetching by Google execs about music-industry licensing negotiations continues, since at least two major labels are holding out on deals to put content on Google Music.  

What Google should understand is that since the modern music industry began in 1999 with the introduction of online file-trading, the technology companies that have enjoyed success are those that realize that working with artists and their intermediaries is crucial. Remember in 2001, when Apple launched the ad slogan "Rip, Mix, Burn"? Disney's then-CEO Michael Eisner slammed it for encouraging piracy, and a few months later Apple dropped the slogan and was negotiating with labels to secure licenses to launch the iTunes Store. iTunes, of course, is now the largest U.S. retailer of prerecorded music.

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The labels would be happy to enable an iTunes competitor with the scale and reach of Google, especially one that controls its own platform: Like Apple with its iPod, Google makes the ascendant Android platform. But Google will have to overcome several key challenges if it wants to effectively operate with the music labels and, I would argue, with movie studios, TV networks and publishers.

Here's how:

Settle the Viacom lawsuit
Yes, Google's video-sharing service YouTube won a key court ruling in Viacom's $1 billion copyright lawsuit. But ever since it was filed in 2006, the litigation has positioned Google as adversarial to content companies. Google should settle the matter, which is on appeal, and extend an olive branch to Hollywood by giving Viacom some of its consumer-trend data on video usage/consumption.

Pay to play
Reports suggest that Google execs are balking at paying minimum guarantees (the amount a licensee pays just to get a label's catalog, with the revenue splits applying to sales and/or subscriber revenue). If that's true, then Google should think of these minimum guarantees as tech companies treat nonrecurring engineering costs: a one-time investment in the future of the service. Assuming all the rumors about Google's difficulties are accurate, minimum guarantees are a simple fact of life and need to be dealt with.

Show Hollywood that Google is in it to win it
Few people remember Google Gears. Or Google Wave. Those services were quickly abandoned when they didn't immediately catch on. Yet the music business can't be a shiny new object that Google quickly tires of pursuing. The record labels -- and, by extension, the rest of Hollywood -- need to know that Google won't walk away from the service, leaving yet another set of early-adopter consumers to feel abused.

Play the data card
Everyone knows that Google gathers tons of data on consumer search patterns. But there is little if any sharing of that valuable information with rights holders whose content drives a lot of those searches. Google has made efforts at helping to highlight music-related search results via OneBox, and YouTube has worked to enable labels to showcase music videos. But if the company delivered extensive music-search data to labels, while avoiding consumer privacy concerns, it would go a long way toward a mutually beneficial partnership.

Address "back office" challenges
In January, Google joined the Digital Data Exchange, an industry group dedicated to achieving accurate measurement of digital-media consumption. That was a great move toward helping the music industry track itself, but there are still significant challenges in streamlining the licensing of music, royalty payments and reporting "plays" and consumption. Google can and should play a larger role in driving standards for this metadata.

Google has some of the most impressive math and technology minds in the world. What it needs is to balance that brainpower with business savvy to win the support of record labels and give Google Music its best chance for success.  

Mike McGuire is vp research at Gartner Media Industry Advisory Services.

 

 

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