Google is reportedly looking to make a serious play in the digital music space and intends to bring out the big-guns, namely YouTube and Android, to do so.
According to a new report by Fortune, the search giant will launch two music streaming services through both its Google Play Store and YouTube, which will presumably have some overlapping features.
Fortune cites unnamed sources from both the recording industry and Google, and says Google Play will act as a "digital locker" for music. Users will be able to buy, store and sort tracks on the platform. While YouTube is already the world's largest storehouse of streaming video (many of which are music videos) with the forthcoming service it is said a subscription fee will be added to unlock additional features.
The report notes that the recent addition of embedded click-to-buy links on user-uploaded songs on YouTube could be a precursor to how the Google Play Store and YouTube service could complement each other.
"It's not difficult to imagine a user's 'collection' becoming jointly visible between the two platforms, or having music purchases or listening histories from one feed informing the recommendation engine of the other," says the report.
YouTube's business model currently relies on selling banner advertising on the site and running short ads before a video plays; in so doing, Google gives a cut of the revenue to recording companies.
Google has said in a statement: "While we don't comment on rumour or speculation, there are some content creators that think they would benefit from a subscription revenue stream in addition to ads, so we're looking at that."
According to reports, Warner Music Group has already struck a licensing deal with Google for its streaming services. Google is also said to be in negotiations with Universal Music Group, Sony Music Entertainment and other labels.
Well-positioned
News of Google's intentions to offer music streaming services follow recent reports that have shown the recorded music industry is finally finding its feet in the digital era. The latest figures show global music sales in 2012 increased for the first time worldwide since 1999.
The Digital Music Report 2013 by the International Federation of the Phonographic Industry (IFPI) says global recorded music revenues are up 0.3%, boosted by downloads, subscription and other channels. According to the IFPI, digital revenues are also up 9%.
The report says download sales increased in volume by 12% globally in 2012 and represent around 70% of overall digital music revenues.
Notably, the number of people using subscription services jumped 44% in 2012, to 20 million, and revenue from subscription services is expected to account for over 10% of digital revenue for the first time. It is also said two-thirds of Internet users (62%) have used a licensed digital music service in the past six months, while among the 16-24 age group, the figure jumps to 81%.
Google is well positioned to experiment with different revenue models for digital music services, given the sheer size of its music audience on YouTube. According to the Nielsen Music 360 report for 2012, 64% of surveyed teenagers said YouTube is their preferred music discovery engine.
The music streaming space is becoming increasingly crowded, with services such as Spotify, MySpace, Rhapsody, Muve, Rdio, Pandora and Simfy. Beats Electronics is also due to launch a music subscription service currently code-named "Project Daisy" (a reference to the first song "sung" by a computer). Reuters also reports that Apple CEO Tim Cook recently met with Beats CEO Jimmy Iovine to discuss a potential partnership for the music service.
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