Last week CNET’s top digital music reporter Greg Sandoval reported that Google Music is not living up to expectations, noting that “Google’s managers have told counterparts at the labels that customer adoption and revenue are below what they expected.”
It’s actually worse than that. According to a highly placed digital music executive, Google Music has actually been losing customers week over week–consistently–since it’s launch last November. “I’ve never seen anything like it”, the source said.”It’s astounding. It’s hard to believe that with an install base of over 200 million Android handsets they’re actually losing customers.”
Evidently some label execs are very concerned that things are so bad at Google Music that the mothership might just decide to pull the plug on the whole service, except for the geniuses at Warner Music who have refused to license it. The thinking is that the industry needs for Google Music to be successful so that the whole sector prospers. A failure of Google Music would be perceived as a setback and, of course, a loss of much-needed revenue for the labels.
According to Sandoval’s reporting, Google’s execs say that they’re not worried since the search giant has yet to really throw it’s marketing muscle behind Google Music and that the service will get a big shot in the arm once Google implements its hardware strategy of building an Apple-style array of digital consumer devices. As example, two weeks ago The Wall Street Journal reported that Google is building a wireless entertainment system that will stream music throughout the home. Good luck with that. Once you start going downhill it’s very difficult to turn the tide.
The other players in the US digital music space, Apple iTunes, Amazon, Rhapsody, Rdio, Mog, and Spotify are now left to fight it out amongst themselves. In the download model, Apple and Amazon are the only significant services with Apple, of course, dominating the entire digital music sector. That leaves the four streaming services. Rhapsody, which has been around the longest, boasts of more than a million paid subscribers, but at least half of those were acquired through the company’s purchase of Napster last year. However there just isn’t any buzz in the marketplace about Rhapsody and its growth potential seems rather limited.
Reports have surfaced that Mog has put itself up for sale, though these reports have been denied by the company. CEO David Hyman told Reuters that the service had 500,000 active users, which means that their paid subscriber base is most likely in the neighborhood of 50,000, a pretty pathetic figure. Hyman may be right after all—nobody’s going to pay good money to buy Mog with that kind of subscriber base anyway. Sounds like a fire sale to me.
Industry experts agree that Rdio is in no better shape than Mog and probably a little worse.
All of this, however, pales in comparison to the sensational growth of Spotify. The service has taken every country it operates in by storm. They’ve demonstrated exceptional steady growth worldwide and are approaching 4 million paid subscribers, with well over a million in the US, and many millions more active users. Why? Because the user experience is the best, hands down. Plus the Spotify guys are just smarter than the competition.
This leaves two models and two companies standing to duke it out, Apple and Spotify. Apple never even gave a second thought to Google Music. Spotify is the only service that Apple views as competition, and they’ll stop at nothing to undermine the Swedish up-start, as is Apple’s usual MO. Rumors have circulated that the real reason that Spotify took so long to launch in the US was because Apple threw up every roadblock possible, including threatening the record labels if they licensed Spotify. But Spotify execs persevered and finally launched in the US. Since then at least 2 of the major labels (UMG and Sony) have publicly stated that the evidence shows Spotify does not cut into album sales but, in fact, supplements them. The fact is that Spotify is a lot like radio in that regard. The more a song gets played, the more money the artist makes. The more a song gets played, the more demand is created to own the song–just like radio.
Keep your eye on this space. It will be interesting to see what Apple does to try and torpedo Spotify in the future.
© 2012, Wayne Rosso. All rights reserved.