Google will launch at least one, and possibly two subscription-based streaming music services this year. The rumours – Financial Times, Fortune and Billboard most recently, if you’re catching up – make that pretty clear. But will these services be successful?
Some music rightsholders certainly hope so. Warner Music Group has reportedly licensed both already, while Universal Music Group’s Francis Keeling has spoken openly about the potential.
“Google, with its hundreds of millions of users through search, and YouTube with more than 800 million users, arguably is the biggest funnel we can have,” he told journalists in February at the launch of the IFPI’s annual Digital Music report.
“Clearly, if we can get consumers into a legal funnel through that route and encourage them into subscription that would have a very positive impact on the business.”
It certainly would, but is the music industry being a bit quick to assume that a Google-run subscription music service would be a slam-dunk nailed-on success?
Perhaps. It would help if there was more evidence of Google being great at selling stuff to anyone other than advertisers. Android being the obvious example: huge market share in terms of smartphone shipments, but lots of developers grumbling that Apple’s iOS is still much more lucrative for paid app sales.
Music, video and e-book downloads on the Google Play store? We don’t know how many it’s selling. Paid storage for Gmail accounts? Likewise.
The company generated more than $50bn of annual revenues for the first time in 2012, and while it didn’t explain exactly what percentage of that came from advertising, you’ll struggle to find many people who don’t think it’s still in the high 90s. Google is really good at selling ads.
This is not to say it can’t be just as good or better at selling paid content and subscriptions in the future, of course. It’s just one reason to be cautious about blithely assuming that Google can steam in to the on-demand music space and make the “very positive impact” that Keeling and other rightsholders are hoping for.
Time will tell, of course. But there’s another question we should be asking: why are we so keen to usher Google down the road of selling paid music subscriptions?
With a net profit of $2.9bn in the final quarter of 2012 alone, Google certainly has pockets deep enough to stump up huge advances and minimum guarantees to music rightsholders to get a new streaming service up and running. If I was a major label, I’d be talking up its potential on those grounds alone – whatever the backdrop of anti-Google rhetoric from my own industry bodies.
But here’s a question: might not Google be equally or better placed to take what it’s really good at – selling ads – and bring that to bear on a genuinely disruptive streaming music service? To help labels and publishers crack the long-anticipated nut of ad-supported music, and the more-recently-anticipated nut of mobile ad-supported music?
If any company is well placed to figure out a sustainable business model for ad-supported music on mobile devices, it’s surely Google. Picture what Nokia is doing on its Lumia Windows Phone handsets with the ad-free Nokia Music, on a much, much bigger scale. Funded by ads.
Caveat one: even Google doesn’t appear to have a magic formula for mobile advertising success yet. Nobody does.
Caveat two: Google doesn’t have the tight control of Android devices that Apple does for iOS – manufacturers like Samsung have their own digital services that they’re trying to popularise, which complicates matters, while operators – recently seen grumbling at Mobile World Congress about Google’s dominance in the smartphone market – have their own agenda.
Caveat three: all this speculation about subscription services might be misinformation – for all we know, Google may be planning to announce an entirely-free entirely ad-funded streaming music service that will kick the legs out from under Spotify, Deezer and the rest. Rule nothing out in the modern music industry.
(Although actually, do rule out the prospect that this could happen without anyone in the negotiation chain leaking it, this being the modern music industry…)
Caveat four: YouTube is already the world’s biggest ad-supported streaming music service, especially if you look at how teenagers use it. Focusing too much on Android may leave us missing bigger potential from the second rumoured service coming from Google – even if those rumours are still fixated on subscriptions.
Google may well have the secret formula for taking paid music subscriptions to the next level, where we’re talking hundreds of millions of subscribers rather than low tens.
But this still seems a good time to wonder how Google could really disrupt the streaming music market, if it set its mind to it, and whether that might not necessarily be a service that fits neatly into the existing Spotify/Deezer/etc freemium template.