Google Looks to Take Bite Out of Apple’s iTunes
Apple’s iTunes is the biggest force in music retailing today.
The company represents roughly 70 percent of all legally downloaded tunes and
28 percent of all music sold, regardless of the delivery format. It has gone
head-to-head with Amazon, Best Buy and Wal-Mart and won.
Now, a rumored new
player to the music business believes that it can give Apple a run for its
money. Google, the internet giant and perhaps the company most likely to give
Apple’s iPhone serious competition, may offer
music via wireless downloads or streaming services. Reports suggest that Google
Music (a name discovered by TechCrunch) may be ready to go live this fall.
According to CNET, an integral
element of Google’s plan is likely to be the recently acquired Simplify Media.
The cloud-based service allows Mac and PC users to stream
songs from their iTunes or other libraries to other web-enabled devices such
as smart phones. Google plans to incorporate Simplify’s technology into future
versions of its Android operating system.
Expectations are that Apple will move
to a cloud computing platform at some point. The company’s acquisition of Lala
(later closed down) was thought at one point to be a move to provide a streaming
version of its iTunes service.
Discussion Question: What
do you think about the prospects of a Google music service and the implications
for Apple and others in the business?
I wouldn’t bet against Apple in this race. While Google is making strides in a lot of areas outside its original focus on search, it does not have Apple’s huge advantage in vertical integration. Apple has developed so much hardware to maximize use of iTunes–between phones, MP3 players and computers–that its head start is similar to the advantage enjoyed by RCA back in the “good old days” when it owned a TV network and sold televisions. At the same time, Google is at the mercy of other companies building Android into their phones and other devices, without a clear strategy to catch up to Apple’s lead.
Whenever a retailer has a dominant position in a niche, anyone can attain significant share by improving on the prevailing business model. Cloud computing steaming certainly provides an opportunity for Google to do that.
I have a library of 12,000 jazz tunes that are packed onto my iPod. I’ve earned that with many hours of excruciating work, managing large files, backups, recovery, and converting my vinyl. When Google gives me an offer to house this library for me, I’m ready to give up my iPod, my beloved iTunes and stream into my Android.
iTunes needs more competition and Google may just be the company to provide it. Moving to a cloud-based system makes sense. Users were disappointed when Apple shut down Lala. Its ability to offer a cloud-based library and to sample songs before buying made Lala a hit with consumers. Google has an opportunity to fill a void in the market at relatively little cost to itself and consumers.
In operating systems Apple’s been the nimble underdog all these years to Microsoft, but in the music space it is now the dominant incumbent.
On the other hand, people have begun comparing Google to Microsoft, except that where Microsoft was the 800 lb gorilla, Google is the 8,000 lb Godzilla. Some of Google’s new products and services, such as Buzz, have been as underwhelming as those from the Redmond (WA) giant and its moves have looked both confusing and confused.
I’m not sure Googzilla can turn nimble, but if it uses its weight and does to music what it does well in email, hosting and so many other services–i.e. give things away–then Apple would really have a problem.
Apple’s iTunes has been a near perfect business model in music retailing. With 70 percent of all legally downloaded music and 28 percent of all music sold, it will be difficult for Google to dig too deep into iTunes’s market share, however, I believe that Google has the capabilities to compete, especially if what users already store in their iTunes libraries can be easily combined or transferred into Google’s. Otherwise, the overwhelming majority will not want to divide their music collections for any number of practical reasons. But if any company has the wherewithal to make it happen it would be Google.
It all comes down to convenience. If non Mac people find the Google service more versatile than using iTunes on different devices, then Google will do well. Mac people will not move from iTunes without a compelling reason to do so. Once we find out the details, we will see if Google is a truly differentiated offering, or just a “me, too” play.
The future of music retailing will center on data storage, retrieval, file editing and manipulation, integration with other media (video), etc. Who offers the product for sale will become less important than the lifetime value of service associated with that product.
That said, as HP is proving with Snapfish, the prime mover in storage gets a huge head start.
iTunes has a big consumer base. Moving current music to a new format can be an arduous task unless the new software and mechanism has a simple and easy way to integrate music into one library. If consumers cannot put all their music into one library, they will have two separate libraries. There would need to be a strong reason for consumers to want to do this.
Yes, it is hard to bet against Apple. But Google is a very surprising company. And, with technology, surprises are quite common. There has been a consistent trend to get unconnected from specific devices. Even the smart phone world with eventually disconnect from the uniqueness of the service provider. Those who can offer ubiquitous connections will win in the end.
Remember, with technology, it is not one’s position now, but where new generations migrate. It is not today’s connections to iTunes that will control this business. It is how Millennials and their younger brethren manage their music.
Apple’s success with the iPod and iPhone can be attributed to iTunes. Once they capture a customer, it’s pretty tough for that customer to switch to another service. Amazon allows music downloads directly into iTunes, which is a great compromise. Google will need a similar strategy to slowly move people away from iTunes.
How many people is this going to be applicable for? People forget that if a person owns an iPod, he is over 85% likely to own a Mac, if she owns an iPhone, she is over 95% likely to own a Mac, if they own an iPad, they are 90% likely to own an iPhone. Way too much product loyalty here.
Indeed, it’s very hard to bet against Apple, and Google will likely lose this battle just as Amazon, Walmart, Sony, and numerous other “iTunes killers” before them have failed miserably.
But having said that, it’s important to recognize music acquisition/consumption experience through iTunes isn’t very good–even to many Apple loyalists. As several comments above have pointed out, it’s a race to the Cloud here.
Ultimately, the best provider of the “celestial jukebox” will win the race. That could well be Apple, but there is still no tangible indication that they are making such a move. I suspect that the Google announcement will spur Apple’s efforts in this regard, in which case Google might as well quit now.
Everyone has taken a shot at the crown worn by the heavyweight champion. Now along comes the most formidable challenger yet. The challengers always have the ability to look at what the champion has done and how they did it. Before they announce the challenge they have put their best and most creative minds to work on how to beat the champion.
This has all the earmarks of being a battle of epic proportions. I am excited to see it develop. My money is still on the champion. They have too much strength, experience and loyalty to lose. But the results will be better products on the market for us consumers.
Ring the bell and let the battle begin!
It’s awfully hard to beat an installed base of infrastructure, including devices that people love. On the other hand, if anyone can pull this off, it’s Google. It should be fun to watch.
I would love to see this played out. The thought of Google having a retail store like Apple is very exciting.