Must have been a slow news week since various news outlets breathlessly announced the rumor that Google may launch a music download service within 6 months, supposedly called Google Tunes. Bear Stearns analyst Robert Peck apparently speculated that this made sense given the explosive growth of iTunes site, and then indicated that this speculation was based on "Mosaic Theory", which must be somewhat akin to Scientology theory, based on the lack of rigorous analysis involved here, although Wikipedia shed some light on it here.
Given the problems with the initial launch of Google Video (recently apologized for by senior Google executives), why would a music launch make any sense? We're looking at a business with 15% gross margins, no ability to differentiate content, a need to work closely with hardware to be successful (with overwhelming market share leader iPod not in that equation), and limited ability to monetize advertising around it - try reading a digital download contract and you'll understand what I mean. Plus they would have to either work with a music aggregator like Musicnet or Loudeye (lowering margins to almost zero), or go through all of the pain of signing label deals, encoding content, adding metadata, etc. Of all of the possible opportunities to expand business, why would Google choose this one rather than focusing on making a much better music/digital media search experience, and monetizing that at the high rate they do for other similar categories?
Now Google is the reigning web powerhouse, so do I think Google may toss out some early version of a product just to see what happens? Yes, that's possible, based on what we've seen from Google Base, Video, Reader, Music Search, Talk, etc., but I would be astonished if the music download business was in their top 25 priorities for 2006 - and you simply can't do music as a side project and expect to be successful since it's deeply related to the hardware, content relationships and editorial, none of which are currently core strengths for Google. Maybe I should have spent more time studying "Mosaic Theory" though...
I think you're right. My acquaintances at Google indicate very clearly that this is NOT something they are serious about right now. Improving and expanding the video offering? Yes. Music? The quote was "There's no money to be made there, so we're going to wait and see." My impression is that once the infrastructure is in place for video, it's a relatively straighforward effort to layer in a music offering later if it makes sense for them.
Posted by: Evan Krasts | January 28, 2006 at 10:13 AM