M+E Daily
Music Streaming Business Heats Up
Story Highlights
By Paul Sweeting
Music streaming services like Pandora and Spotify may be yet to turn a profit but the streaming business is suddenly hot, at least for the record labels. According to a report in the Financial Times, Google is in talks with the labels about creating a new music streaming service for launch in the third quarter of this year. The service is expected to include both a paid tier and a free, ad-supported tier, and could come pre-installed on Google’s Nexus line of smartphones and tablets. The service could also be incorporated into the Android platform and made available on other mobile devices.
News of Google’s interest in music streaming comes as Apple to launch its own music streaming service as part of iOS. Reports that Apple was in talks with the labels about launching a Pandora-like music streaming service first surfaced last year.
The entry of Google and Apple into the business could come at a critical time for the record companies as they try to fend off efforts to roll back the licensing fees and performance royalties they receive for streaming rights. Pandora, the leading ad-supported streaming service in the U.S. has been pushing a bill in Congress to reduce the statutory royalties that internet radio services must pay to the labels. And according to a report on the technology web site The Verge, Spotify has begun pressing the labels for significant roll backs in its licensing fees as it seeks to renew its rights deals (as an on-demand service Spotify must negotiate for rights directly from the labels rather than relying on the compulsory license that covers internet radio services like Pandora).
Having two heavyweights like Google and Apple chasing those same rights could give the labels the leverage to hold the line against rate cuts.
The labels need to strike a careful balance, however. While having more and better-heeled buyers in the market for streaming rights should help keep prices up, letting prices get too high too fast could drive startups out of market. In the long run, it’s not in the labels’ interest to have the likes of Google and Apple control the music streaming business as Apple currently does the music download business.
Ultimately, the streaming rights deals struck over the next few months could go a long way toward shaping the long-term competitive landscape of the business.
