Rumor Mill: Google building mobile music service to challenge Spotify

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Google (NASDAQ:GOOG) is reportedly developing a subscription-based streaming radio service optimized for mobile devices, taking aim at rival efforts from Spotify, Rhapsody and Pandora. 

Citing sources with knowledge of the situation, publications including The Wall Street Journal and Bloomberg report Google is currently in talks with major record labels to license their catalogs for the premium service, slated to go live as soon as the third quarter of 2013. Insiders said Google's YouTube unit is also seeking to obtain licenses to roll out a paid subscription service for music videos. While the expanded music and video offerings are designed to boost the consumer appeal of Google's Android mobile operating system, giving Android device owners expanded access to entertainment on the go, services are expected to roll out to non-Android smartphones and tablets as well, one source said.

A Google spokesperson told Bloomberg the company doesn't comment on rumors or speculation.

A streaming radio service would complement the cloud-based Google Music initiative, initially introduced in 2011, which automatically scans and syncs each user's existing digital music library for streaming across all 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.

The addition of a premium streaming music solution would also help Google remain competitive with archrival Apple (NASDAQ:AAPL), which reportedly has designs on its own digital music service. Last fall, The Wall Street Journal and The New York Times reported the computing giant is mulling a multi-platform effort that would program content based on users' favorite artists, songs and genres. Sources have said the service would likely take the form of a preinstalled application integrated into Apple devices like the iPhone and iPad.

Soon after, Bloomberg reported Apple was deep in talks with record label partners ahead of a proposed first-quarter 2013 launch. Insiders stated the labels demanded an upfront licensing fee as well as a percentage of ad revenues and tools for integrating commercials spotlighting their recording artists. Sources also said Apple viewed the streaming initiative as a way to grow its iAd mobile advertising platform and was looking to integrate the service with its iTunes digital music storefront to fuel download sales.

Fifty-six percent of all smartphone owners access music through their devices, according to a recent survey conducted by researcher NPD Group. Among them, 39 percent of respondents access music on their phones at least once per day and 54 percent said they are using the device for music playback more than they did a year ago. Sixty-five percent of smartphone owners who listen to music access Internet radio services like Pandora, and 30 percent are using on-demand services like Spotify or Rhapsody. In addition, 60 percent have ported over their own digital music files.

For more:
- read this Wall Street Journal article
- read this Bloomberg article

Related articles:
Google Music update brings downloads, YouTube sharing
Google Music storefront goes live on Android Market
Google expands Music Beta to Apple's iOS via HTML5 web app
NPD: Half of smartphone owners use their device for music listening
Report: Apple launching streaming radio service in early 2013
Reports: Apple building streaming radio service for iOS

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