[JPL] Why Record Labels and Google Music Couldn't Agree on the Cloud
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
"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
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 Operations
Oak Park, MI 48237
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