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Google Nabs Sony, Universal for On-Demand Music Service

Colorado Blvd Santa Monica Google Screengrab - H 2012
Google's Santa Monica headquarters.

UPDATED: More details have been unveiled about the tech giant's new musical venture, which is poised to rival Spotify and Rhapsody.

Google Inc. jumped into the increasingly crowded music subscription business Wednesday, announcing an on-demand service that’s “uniquely Google.”

Dubbed All Access, the service debuts Wednesday in the U.S. at $9.99 a month, with a 30-day free trial. Subscribers who sign up before June 30 will get a special rate of $7.99 a month.

The announcement, made at Google’s I/O conference for developers, came soon after the Silicon Valley technology giant cleared licensing deals with Warner Music Group in March, and in recent days with Universal Music Group and Sony Music Entertainment to be able to offer "millions of songs" for the service. It also has a deal with Merlin Network, which represents independent labels such as Rough Trade, Beggars Group and Warp Records.

Music executives applauded Google's entry into the market.

"Anytime a mainstream company decides to invest in digital music that is good for the entire industry," said Scott Ambrose Reilly, the North American Chief Executive of X5 Music Group, a boutique label based in Stockholm, Sweden. "But seeing a mainstream advertising company like Google launch a paid only service does raise some eyebrows. Hope springs eternal and let’s all hope this product lives up to the Google reputation for worldwide mass market appeal. If not at launch then hopefully in the very near future."

The labels have been eager to work out deals with Google, not just because new distribution channels would inevitably result in increased licensing revenue, but also because of the scale that Google represents. The company measures its audience in billions of people, whereas music numbers its potential customers in the millions. 

"Even if Google can convert a miniscule percentage of its vast audience to All Access, it will be considered a huge success," said Mark Mulligan, principal analyst at Midia Consulting.

Google's shares soared past the $900 mark Wednesday, gaining $28.90, up 3.3%, to close at $916.00 following its announcements, which also included updates to Google Maps, Photo, Search and others.

All Access features an “Explore” tab that serves up personalized recommendations based on the listener’s existing library of music and listening patterns, as well as handpicked songs from Google’s music editors.

In addition, each song can with one click be turned into a radio station with “a neverending list of tracks.”

“It’s radio without rules,” said Chris Yerga, Google’s Android Engineering Director.

The service also has a “Listen Now” option that contains new releases, recently added tracks and automatically generated radio stations so “there’s always a great selection for me, and every day, it surprises me,” Yerga said.

All Access's features are less surprising -- its recommendations, integration with its existing locker service, personalized radio stations and availability across multiple devices and platforms are standard among rival on-demand services such as Spotify, Rhapsody, Xbox Music, Sony Music Unlimited, Slacker and Rdio. Even the price points, $7.99 to $9.99, are comparable to what other music services charge. 

What is surprising is that Google, whose primary business is advertising, has decided not to have a free, ad-supported tier that would have been competitive with Spotify's offerings. Instead, All Access is one of the few products that Google has decided to charge customers for the full-freight, with no subsidies.

"There’s a big difference obviously between free and $9.99," said Russ Crupnick, an industry analyst with the NPD Group. "And most listeners still say they aren’t willing to pay. With other subsidized options out there like Spotify, they don’t have to."