Google paints Apple into a corner with latest mobile media moves

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Jason

Google's (NASDAQ:GOOG) Android long ago eclipsed Apple's (NASDAQ:AAPL) iOS in terms of sheer size: Gartner reports that Android powers 74.4 percent of all smartphones sold worldwide during the first quarter of 2013, up from 56.9 percent during the year-ago period and widening its already considerable lead on iOS, which plummeted to 18.2 percent from 22.5 percent in the first quarter of 2012. But size isn't everything, and iOS has always maintained a number of competitive edges over Android: Apple's App Store has consistently proven to be more lucrative for developers than Google Play, for example, and its Game Center platform enabled multiplayer and social interactions that Android gaming couldn't match.

Couldn't until now, that is. Google kicked off its annual I/O developer conference Wednesday with a flurry of announcements that dramatically expanded the scope of the Android ecosystem. Those announcements include Google Play Game Services, coming to Android, iOS and the Web. The initiative effectively mirrors Game Center by offering developers the tools to store players' progress in the cloud, allowing gamers to start a title on one device and continue playing on another exactly where they left off. Google Play Game Services also supports cross-device achievements and leaderboards, as well as multiplayer games via Google+ social networking accounts.

Google is also taking on Apple's iMessage and FaceTime--not to mention WhatsApp, Viber and BlackBerry (NASDAQ:BBRY) Messenger and other over-the-top messaging apps--with Hangouts, which bundles text, image and video conversations into one standalone app. Also available to Android, iOS and Web users, Hangouts "is a list of conversations, not contacts," according to Google Senior Vice President of Social Vic Gundotra, adding that conversations can last years and can span across multiple devices. "The conversation feels alive," he said. "It really feels like you're in the same room together."

Android also appears increasingly hospitable for developers. Google said it has now recorded 48 billion Android app downloads through Google Play and has already paid out more to developers this year than it did all of last year. Google also revealed that Android app revenues are now 2.5 times higher in 2013 than a year ago, but it did not divulge any numbers. In a move to further boost Android developer revenues, Google is now rolling out new Google Wallet APIs designed to simplify purchases within Android apps and support customer loyalty programs.

But Google isn't just catching up to Apple: It's also pulling ahead in several key mobile categories. While the much-maligned Apple Maps has made only incremental progress since going live last fall, Google is expanding its own Maps for Mobile platform with the addition of coupons: While the company currently offers merchant offers and discounts through its Google Offers and Google Wallet offerings, Google Director of Maps Daniel Graf contends that adding deals directly into Maps will dramatically expand the service's addressable market. Graf also said that Google Maps will support a "revamped incident experience" that alerts users of potential traffic snarls and, if those users are receiving turn-by-turn navigation, the system will automatically reroute around the incident. Maps for Mobile is also coming to Android tablets as well as the iPad. "It's a brand new experience," Graf said.

Here's another brand new experience: Google has beaten Apple to the punch in the race to roll out a streaming music service. According to Google Engineering Director Chris Yerga, the new Google Play Music All Access takes a "uniquely Google approach" to music listening and discovery, offering personalized recommendations, featured content and music tailored to users' music collections and previous listening behavior. The service allows users to listen to specific songs and albums and to create radio stations based on any song or artist. "This is radio without rules," Yerga boasted. Google Play Music All Access is launching now with a 30-day free trial for users in the United States. After that free trial period, the service will cost $9.99 per month (though users who sign up for the service this month will pay only $7.99 per month).

Given Apple's dominance over the digital music segment--a market it virtually created with the launch of iTunes a decade ago--it seemed unthinkable that it would fall behind Google in the race for streaming music supremacy, yet here we are. It's even more shocking in light of how long its so-called "iRadio" has reportedly been in the works. The Wall Street Journal and The New York Times first reported on "iRadio" last fall, but insiders say the effort remains in limbo, stymied by ongoing licensing negotiations: Last week, The Financial Times reported Apple had completed a deal to offer Universal Music Group, and while an agreement with Warner Music is said to be imminent, Sony Music Entertainment is balking at Apple's proposed royalty terms.

Insiders said Apple initially proposed a royalty of about 6 cents for every 100 tracks it streams, but it later raised its bid to about 12.5 cents, in line with the rates paid by Internet radio service provider Pandora. While it is unclear whether Universal has accepted the 12.5-cent rate, the other labels are believed to be demanding even more favorable terms. Apple reportedly is offering labels three tranches of iRadio revenue: Royalties per track streamed, a share of advertising proceeds and a guaranteed minimum sum over the course of the contract in the event the number of plays or advertising sales disappoint. No one's saying what Google is paying its Music All Access label partners, but the smart money says label executives will be able to leverage Google's first-mover advantage to strong-arm Apple into improving its offer.

All of this means that with its own Worldwide Developers Conference about a month away, Apple suddenly looks vulnerable like never before. Reports indicate its forthcoming iOS 7 will bring sweeping design changes, introducing a "flat" user interface that eliminates longtime iOS hallmarks like gloss, shine and skeuomorphism. But, an overhauled UI isn't nearly enough to make an increasingly stale iOS seem fresh and exciting again. iRadio isn't enough, either: Google got there first. Apple needs something huge--something completely revolutionary and unexpected that redefines the mobile experience. It's done it before, but can it do it again? The clock is ticking.--Jason

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