Is Google Music Doomed?

The wraps are now officially off of Google's (Nasdaq: GOOG  ) Music Service. The original Google Music launched last year, but it has remained in beta until now. The beta is now gone, and Google Music is here to stay. But for how long?

The service was originally just a cloud-based storage locker for all your tunes -- up to 20,000 -- that you had to upload yourself. Now that the service is open to the public, it expectedly adds a new storefront to try to take on Amazon.com's (Nasdaq: AMZN  ) MP3 Store and Apple's (Nasdaq: AAPL  ) iTunes.

It will also tie in heavily with Google+ to add a social twist. But the social aspect of sharing your purchases isn't particularly compelling. Spotify's free service easily integrates with the social network you're already using more anyway.

Source: Author's inbox (screenshot of an email received this morning as a Google Music beta user).

Fellow Fool Rick Munarriz has listed 5 reasons that Google's Music Store will fail. How well does the service hold up against those reasons?

"1. Google still isn't playing nice with the record labels"
Big G has mostly addressed this concern, as the search giant was successful in bringing three of the four major music labels onboard. Sony (NYSE: SNE  ) Music Entertainment, Universal Music Group, and EMI Music are all going with the flow. Citigroup (NYSE: C  ) has agreed to sell pieces of EMI to Vivendi and Sony for a total of $4.1 billion.

Warner Music Group is the last holdout that's still playing hard to get. This means you'll have to wait to get your Phil Collins, Regina Spektor, and Deftones fixes, at least if you're hoping to get them from Google. But even without Warner, Google's new store will feature more than 13 million tracks.

I'll give Google 0.75 points on this one. Google: 0.75, Rick: 0.

"2. The cloud advantage isn't really an advantage"
Nothing has changed in this department from the service's initial introduction. Google Music is still a cloud-based storage locker, just like Amazon's Cloud Player. Apple's recently launched iTunes Match ties in with iCloud and promises to deliver all the same cloud functionality without the need to upload all your files.

Google really doesn't have anything here to differentiate it, while Apple does. Also like Amazon, any songs purchased through its proprietary storefronts don't count against your storage limit, with the service effectively storing it for free once you've paid for the music. In this way, Google and Amazon are essentially offering the same service.

I can speak from experience on this one. I've been in on the Google Music beta for ages, and it literally took weeks to upload my roughly 10,000-song collection, making sure to selectively turn on the uploading at off-peak hours so as not to hog all the bandwidth in my house throughout the day. As my wife's personal IT department, I was also tasked with uploading her collection.

I won't opt for iTunes Match, but its unique approach of scanning your library against Apple's master library is much more efficient than this.

Google doesn't get any points here. Google: 0.75, Rick: 1.

"3. Apple and Amazon have the market cornered"
This still holds 100% true. iTunes and Amazon MP3 Store are still the top dogs in digital-music downloads. Wal-Mart (NYSE: WMT  ) got out, despite its massive retail presence, and Rick's argument still holds up. Even though the Google Music Store will tie in to the Android Market, it's still going up against bigger incumbents that have momentum.

People are creatures of habit, and at this point we're all trained to visit Apple or Amazon for our MP3 needs. It's going to take a lot of persuading from Google to convince buyers to get familiar with a whole new interface and buying experience for no particular reason.

Google: 0.75, Rick: 2.

"4. It's been a struggle for Google to sell digital media"
Like Rick, I associate Google with free stuff and services. When you think of Gmail, YouTube, Chrome, Books, and Voice, for starters, it's downright offensive to even consider opening your Google Wallet to pay for any of these services. Google's free offerings are what keep people coming back, to the glee of Google's advertising strategy.

Google Music has always offered a selection of free music, and it aims to get more aggressive with the handouts. But offering free music doesn't necessarily incite you to start paying for music. Even your local Starbucks offers free music on iTunes every week. Google has always had trouble monetizing its services directly from users, and this time will be no different.

Google: 0.75, Rick: 3.

"5. Patience isn't always a virtue at Google"
Google has always been fickle with its scattershot approach to services that it experiments with. Will Google will stick with it for the long haul, or will it kill the music store if it doesn't take off quickly? We'll have to be patient to see how this one pans out.  

This one is a push. Google: 0.75, Rick: 3.

Recount!
Our final tally shows that Rick's points still hold up. I don't doubt that Google Music will be a popular service among users, particularly the Android crowd that now makes up more than half of all smartphones. The real cloud hanging over this cloud service is whether the store will be successful. As with any store, it relies on getting people to buy stuff, and Google has never been particularly good at selling stuff.

Add Googleand Amazon.comand Appleto your Watchlist to see them wage a war in cloud music. And get access to this free reporton another revolution sweeping the mobile sector and how you can profit on it.

Fool contributor Evan Niu owns shares of Amazon.com and Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple, Starbucks, Wal-Mart Stores, Citigroup, and Google. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, Wal-Mart Stores, Starbucks, and Apple, creating a bull call spread position in Apple, and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 17, 2011, at 7:06 PM, bobyk3 wrote:

    There is always the new generation who would not want Amazon - it is not cool enough. Amazon is really for older folks.

    It is like gmail. Avg age of gmail users may be 30 years less than that of Yahoo and Hotmail.

  • Report this Comment On November 17, 2011, at 7:22 PM, mjamesboy wrote:

    Maybe their goal is not to win more but loose fewer eyeballs. I like Google, I'll just use their music player instead of messing with ...

    More stickiness at every turn.

    Rating a multifaceted company on a single perspective may be short sited.

    Sent from my Chromebook!

  • Report this Comment On November 17, 2011, at 9:12 PM, jerr1 wrote:

    You fail to point out the market for digital medai still growing . Google exacutes it bussness excellently an its music store should be smash . Sure was for apple

  • Report this Comment On November 18, 2011, at 6:12 AM, brightkid wrote:

    I like your article and your considerations.

    One thing to account for are all the videos played on youtube, if someone wants to buy a song, how easy would it be to add a buy it here link at the end, pointing to Google Music (of course)

    With the massive amount of traffic that Google has, and users used to paying for songs today, why would it be a stretch to find themselves on the site and purchasing a song? I don't think that Google being unable to monetize directly from their users is a fair argument here.

    Cheers

  • Report this Comment On November 18, 2011, at 5:13 PM, rfaramir wrote:

    I disagree with this part:

    "'3. Apple and Amazon have the market cornered'

    This still holds 100% true."

    No. You cannot corner a market on non-scarce goods. This area of service is perpetually open to competitors. Although to break in requires a large infrastructure, Google has that, in spades.

    While 'doomed' is a bit over the top, I do generally agree with you that Google will be playing 3rd fiddle here. That doesn't mean it won't be profitable. There's a lot of growth possible in this pie.

    (Long AAPL)

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