Why Google Music Won’t Matter

Wall Street is buzzing again with rumors that Google will soon launch a digital music service to rival iTunes. While a showdown between Apple and Google would be the Wall Street equivalent of Godzilla vs. MechaGodzilla, analysts seem to be so caught up in their visions of “enhanced revenue streams” and $500 share prices, that they’ve missed one essential point. Google Music just won’t matter much. Here’s why:

The latest rumors were triggered by a meeting between music industry executives and Google executives (can’t executives just have lunch?). The lunch lead one Google watching analyst to report:

“The music industry is broadly unhappy with the fixed pricing and lack of subscription options at the market-leading iTunes Music Store and likely to support alternative services”

Translation: While the music industry may have finally found a digital music model that actually works, they don’t like anything about it. Specifically they don’t like:

• Steve Jobs. The fact that Jobs has a tendency to call record industry executives names doesn’t help much.
• The iPod. iTunes compatibility is limited to the iPod and the labels know there’s no chance they’ll ever get a piece of that action (although at least one executive has suggested they should try).
• Fixed pricing. Labels seem to have some definite ideas about how digital music should be priced. They’d like to see variable pricing based on a number of factors. One idea that has been floated frequently would allow the labels to charge more for artists that are more popular.
  It’s pretty clear the labels aren’t employing any economists. When scarcity is not an issue (and it isn’t an issue with digital music) prices should drop as demand rises.
• Individual Songs. Labels hate the way iTunes allows consumers to download individual songs. They believe that album sales will suffer as a result. They’d prefer to force consumers to buy entire albums (releasing better albums is apparently not an option).
• Digital Rights Management. The labels hate the fact that Apple dictates standardized DRM terms for all iTunes songs. They’d prefer to have the ability to determine their own DRM rules on a per-release basis. Imagine how great it’ll be when some of the songs in your music collection only play for a week or two, and others can’t be burned to CD, and still others can’t be copied to more than one portable player.
• One Billion Downloads and Counting. What the labels hate most is iTunes popularity. With every iTunes download it becomes that much more difficult for the music industry to break away from Apple. The labels had their chance early on, but squandered it on a pointless attempt to build an industry standard DRM scheme. It’s apparent the labels haven’t learned a thing from the SDMI fiasco.

Clearly, the labels want an alternative that is nothing at all like the iTunes Music Store. While they are apparently looking to Google to deliver such a service, they might be better off partnering with the Prism DuroSport people.

If Google does develop a service that addresses all of the label’s concerns, it’s bound to fail. If not because of confusion over variable pricing and DRM restrictions, then because Google won’t be able to deliver the one thing that matters most to digital music consumers — iPod compatible music.

What the labels apparently can’t see is that iPod compatibility is not that difficult to achieve. There’s already an online music service that offers consumers hundreds of thousands of songs in an iPod compatible format. For a reasonable monthly fee EMusic offers DRM-less songs that play in any digital audio player. The problem is, the recording industry may actually fear unrestricted mp3 files more than they fear Apple and iTunes. As a result, none of the major labels offer songs through EMusic.

While Apple’s lock on the digital music market may one day be broken, consumers (and anyone who tries to compete with Apple) will be faced with the old chicken-egg problem. Before iTunes can be overthrown the iPod needs to be overthrown, and before the iPod can be overthrown iTunes needs to be overthrown. Either that, or the music industry needs to change it’s views on DRM.