Report: Google launching subscription-based streaming music service

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Google (NASDAQ:GOOG) is poised to unveil a subscription-based streaming music service rivaling platforms like Spotify and Pandora.

Citing sources with knowledge of the matter, The Wall Street Journal reports Google has completed deals with the three major record labels--Universal Music Group, Sony Music Entertainment and Warner Music Group--to offer Android device owners unlimited, on-demand streaming access to millions of songs. The proposed pricing structure is unknown, and it is also unclear whether Google will integrate advertising, which generates the bulk of the company's annual revenue.

Sources added that Google-owned video aggregator YouTube also is in talks with labels to roll out a premium subscription service for music videos and potentially also for audio-only content, although the status of those negotiations is uncertain. The Verge notes that YouTube welcomes more than 800 million unique visitors a month, and music videos rank among the site's most popular clips, piquing record label interest.

Insiders said Google could announce the streaming music service at its annual I/O developer conference, kicking off today in San Francisco. At I/O 2011, Google introduced its cloud-based Google Music initiative, which automatically scans and syncs each user's existing digital music library for streaming across all of their connected devices. Consumers can also purchase individual songs or complete albums via the Web or any Android device, with all premium content instantly added to their Google Music library.

A Google spokesperson declined to comment.

Given that Android powers close to 75 percent of all smartphones shipped worldwide during the first quarter of 2013, Google's music efforts could pose major challenges for dedicated streaming music services like Spotify and Pandora. Spotify charges $9.99 per month for unlimited on-demand access on any connected device and also supports a free, ad-supported version. Pandora charges $3.99 per month to let users to create personalized "stations" programmed according to their favorite performers and genres; it also offers a free, ad-supported version.

The Google music service would also vault the company ahead of archrival Apple (NASDAQ:AAPL), which is reportedly developing a streaming platform of its own. The Wall Street Journal and The New York Times first reported on the so-called "iRadio" service 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.

Amazon (NASDAQ:AMZN) is reportedly exploring a streaming music initiative as well. The Wall Street Journal states Amazon is building a device for streaming audio through speakers or a television set and also plans to roll out a digital subscription service for connected devices.

For more:
- read this Wall Street Journal article (sub. req.)
- read this Verge article

Special Report: Google I/O 2013: Complete coverage

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