opinion


Google jockeys for space in US’s increasingly crowded music-streaming sector

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Google has launched a music-subscription service to complement the sale of music downloads from Google Play. The strangely titled Google Play Music All Access will go up against the likes of Spotify, Rdio, Rhapsody and Xbox Music in the US, with overseas rollouts expected soon. There is no advertising-supported tier, and a monthly subscription costs $9.99. An introductory price of $7.99 is in place until the end of June. Like its rivals, All Access offers curated playlists and suggested music-discovery options. All Access ties in with Google’s music-locker service, which provides storage for up to 20,000 tracks owned by a user.

Why does it matter?

Services such as Spotify, Rdio, Rhapsody and Xbox Music will have to contend with another company trying to forge a space in the subscription sector. With Apple set to launch its iRadio service later this year, the streaming sector – in the US at least – is starting to get crowded. According to the latest RIAA figures, revenues from subscription and streaming services last year totaled $570.8m, up 58.9 per cent from $359.2m in 2011. Included in these figures are retail revenues for paid services and wholesale revenues from advertising-supported services. The number of digital subscribers to paid on-demand services totaled 3.4 million at end-2012.

Although the growth rate is impressive, the number of subscribers is not high enough to support all of the services operating in the US in the longer term. Most analysts are expecting some sort of shakeout in the music-subscription sector, where only those services with lots of subscribers or deep pockets will survive. Google certainly has enough funding for the long haul, but the question is whether it can attract enough users.

Why now?

In most countries, music-subscription services are only just breaking out of niche status. There are exceptions to this rule: Scandinavian consumers have gone crazy over music subscriptions, and revenues from the sector have exploded in the region in the last couple of years. Although this is good news for the music industry, what isn’t so welcome is the impact that subscriptions are having on download sales. Take Finland, for example: Although not the biggest music market in the world, the country has seen a big rise in trade revenues from subscription services. In the first three months of this year, subscription sales rose sharply compared with the same period in 2012. But downloads? Well, trade revenues from singles sales fell 15.5 per cent, and full-album downloads were down 4.1 per cent.

Why does this matter? If consumers are going to choose subscriptions over downloads in the longer term, any company wanting to make it big in digital music will need to offer subscription services. The US has not seen the same explosion in subscription numbers as Northern Europe, but that is not to suggest that it won’t happen. Even Apple, the biggest critic of music-subscription services, is set to enter the fray later this year. Google might have beaten Apple to the starting line, but it will need to come up with something very special if it is to win the race.

Chances of success?

One feature of most subscription services is that they are particularly successful in their home markets. Spotify hails from Sweden, WiMP is operated by Norwegian streaming-media company Aspiro, Deezer is a French company, and Melon and Mnet are based in South Korea. In each of these countries, the popularity of local services far outweighs interest in any other offering. Although Google is a US company, its reach is global, meaning that the company doesn’t have a home market as such.

Some might cite Apple’s global success with iTunes as proof that success is possible anywhere: Even though it is a US company, it is the dominant download service in most of the countries where it operates. However, Apple entered digital music when the sector was on its knees. The company created the best media player, with a built-in store, more than 10 years ago and is still reaping the rewards today. Google might be able to rival Apple in terms of financial backing, but that doesn’t guarantee success. Microsoft is the perfect example of a company that has thrown millions of dollars at the music industry and has largely failed to break down the doors.

Google does have an advantage over its rivals in that it has a massive number of Android-powered devices in the market, and the key to its success might be tied to how many Android users it can convince to pay out for a music subscription.


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