[JPL] Why Record Labels and Google Music Couldn't Agree on the Cloud

Dr. Jazz drjazz at drjazz.com
Fri May 13 00:03:04 EDT 2011

Google Music's May 10 launch was driven in part by competition (Amazon, 
Apple) and indecision, including the dollar figure labels were demanding 
as an upfront advance.

Google's decision to launch a music locker service was a big topic of 
discussion on the sidelines of the NARM conference in Los Angeles this 
week. The reaction from the more veteran music industry attendees is 
simply anger.

"People are pissed," said one source from a major record label in 

The announcement didn't catch the labels totally by surprise. Google 
tipped them off that it was coming. But that didn't temper the negative 
reaction that resulted. And the tone of Google's comments--essentially 
blaming the labels for not being able to reach a deal--didn't help.

So what went wrong? Here are the three largest sticking points that 
arose in the licensing negotiations:


Labels of all sizes wanted upfront advances. Google was willing to pay 
upfront advances. But some labels wanted larger upfront advances than 
others. And then other labels would learn of the advances agreed to in 
those deals and then demanded similar rates. And the independent labels 
wanted to be treated on equal terms as the majors.


There was disagreement about whether music files gained from P2P sites 
should be allowed into the locker. But the bigger issue was that labels 
wanted to use the negotiating process to lean on Google to eliminate 
links to pirate sites and services from its search results.


Labels don't negotiate in a vacuum. They consider how a given service 
will impact the revenue streams they're currently enjoying from other 
services that may prove competitive. Will licensing to Google bring in 
new revenue, or just take revenue away from current streams? As much as 
some executives may want a strong competitor to Apple in the 
marketplace, others may not, and leverage from Apple may have played a 
role here.

Also complicating matters, some sources say, is that Google kept 
changing the details of what they planned to launch. At one point, a 
music subscription streaming service was discussed. Then scan-and-match 
locker with various types of features built atop it.

Google ultimately went live with what it did for two reasons. First, it 
had completed work on its new music player app for Android devices six 
weeks prior to the music locker launch. Google wanted to get that app 
into the marketplace. Another motivating factor was Amazon's recent 
launch of the Cloud Drive. And finally Apple's upcoming launch that many 
expect to happen by late spring or early summer.


Dr. Jazz
Dr. Jazz Operations
24270 Eastwood
Oak Park, MI  48237
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SKYPE:  drjazz99

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