Google and the Majors: a Zero Sum Game

A few months ago, Google lost patience with the major labels and launched its own license-free Music Beta Site, an annoyingly slow, song-by-song, upload locker service. Now, Apple seems to have something better with the labels’ consent and Google seems ready to come to terms by acquiring the proper licenses. Rumors point to the imminent launch of its own MP3 download store.

Music Beta

The Google music service aims at recommending songs from an online library to a person’s Google+ contacts; said user would then be allowed to listen to those songs one time for free, after which they would become available for sale as an MP3 download for 99 cents. With word-of-mouth  being the catalyst of music sales, other digital-music services, including Spotify, are jumping onto the bandwagon of social marketing. Currently, Google’s online library goes by the name Music Beta–a free service that lets users upload their music to servers.

Google Executives claim that they intend to start the music-download service this week or next , even though they are unlikely to lock down the rights to sell music from at least two of the four major labels in time. The song-recommendation feature would only work for music released by record labels with licensing agreements in place. Without the involvement of all four major labels, users cannot be expected to continue to use the service since they will not be able to find the artist or song they want. Since the major labels distribute about nine-tenths of the music sold in the U.S., Google has a problem.

This issue has been relevant for some time. Apple iTunes (2003) and Spotify (2011) had to wait to launch until they had the four majors on board. So far, EMI is the most likely major to reach an agreement with Google. Next would be Universal Music Group, the world’s largest record corporation. Two independent record labels were also closing in on a deal with Google, but there is nothing official about any of these rumored arrangements.

Moreover, Google doesn’t do enough in the mind of Sony executives to curtail piracy, especially at its YouTube and Android mobile satellites. In fact, Sony believes that the online locker would not discriminate between file sharing and legal music, effectively endorsing piracy. Warner feels that Google’s offer is simply not good enough; in its primary form the service is free and does not generate revenue. Of course, Google counters that the service will provide enough MP3 download sales down the road to make a difference. However, this would only hold if Google had access to the full catalog of US music, which right now it does not.

A Conflict of Interest

Google says it is all about cataloging user information. Regardless of how much Google pays for these licenses, however, it will not appease artists, labels, or other rights holders. No matter how convincing Google appears to be about uploading authorized content into its cloud, its search engine is still the number one portal for illegally acquired content. All of that content could end up in the licensed Google Music cloud, without any reparations paid to the labels.

A big question for Google is how they would deal with users who upload tracks that were acquired through illegal means. Google says that the terms require people to only upload lawfully acquired music, but that it would “respond appropriately to rights holders who believe their work is violated.” The company states it will assist with take-down requests “if work gets violated”. But, how would the rights holder ever know when a violation occurs in the first place? It is impossible to stop every single case of infringement. However, with all the resources that it has, there must be a way for Google to create more friction in the market for illegal music.

Google’s service is a private music locker, which means that the only person who has access to it is the user. In the end, only that user knows if they obtained the music legally or not. Besides, if the industry did not sue Amazon for launching without licenses, would it take on an even bigger giant? Launching without licenses was the lesser of two evils for Google, who could have chosen to pay the licensing fees. In fact, it appears many labels wanted larger cash advances up front, and their bidding put Google off.

Final Remarks

In the end, the music locker was supposed to be a way to make the consumer’s music experience effortless. While the story is still evolving, this could have been an opportunity to make the music more socially valuable while helping copyright holders to make more money. The labels may have their share of blame, but it is Google that ironically sees no problem in wanting to distribute an artists’ product when at the same time they seem to be enabling its theft.

If digital music were a tangible product, the consequences for Google might arguably be stiffer. But music is an intangible product and an important cash cow for Google’s business—so  Google decides to trump the law. In the end, both transacting parties pay a price.  Google does not get to launch a complete service with a full catalog, and the record labels miss yet another opportunity to drive substantial revenues to their coffers.

By Megan Graney

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