Another Heavyweight Enters the Streaming Music Space

Google is the latest major tech company looking to expand its offerings in the streaming music space, after Amazon and Apple both made waves in the industry.

Jun 10, 2014 at 3:30PM

Earlier this month, it was announced that Amazon (NASDAQ:AMZN) was planning to enter the streaming music market by adding the service to Amazon Prime. This followed the announcement that Apple (NASDAQ:AAPL) was acquiring Beats for $3 billion. Apparently, major tech companies see a lucrative opportunity in the world of streaming music, an industry that was previously dominated by the likes of Pandora and Spotify. Now, rumors have surfaced that Google (NASDAQ:GOOG) (NASDAQ:GOOGL) will be acquiring streaming music provider Songza for roughly $15 million. Things are heating up in the industry.

Enter Google
Google is perhaps arriving to the party a bit late, but this Internet titan has also decided to invest in its streaming music offerings. The company is said to be in talks with streaming music service Songza over a possible acquisition. However, the deal has not yet been finalized, and it seems likely that Google will have to pony up more than $15 million. The figure certainly wouldn't put much of a dent in Google's massive balance sheet, and is considerably lower than Spotify's $4 billion valuation as well as Pandora's $5 billion market cap.

Google did already offer a streaming music service, but at $9.99 a month, it's not a particularly appealing or popular alternative. On the other hand, it does own YouTube. The company is now looking to beef up its streaming music presence, and Songza's 5.5 million active users should provide Google with some much needed cred in the area. Moreover, the service has an advanced music curation system which takes into account factors such as the user's mood, surroundings and activities.

With the streaming music industry currently experiencing explosive growth, it's no wonder that Google is looking to get a piece of the action. The company is also under pressure to expand its lineup, as several of its major rivals have been aggressively moving into the space. Let's take a look at some of the other names trying to break into streaming music.

Crowded out?
The two other major tech companies making headlines with streaming music at the moment are Amazon and Apple. Amazon is reportedly going to add a streaming music service to Amazon Prime, which already features a video-on-demand function. The addition is set to launch over the summer, and will feature a fairly limited selection of music released more than six months ago. Due to the restrictive nature of the service, it's unlikely to lure customers away from other major players in the space, but it does provide a nice bonus for Prime subscribers.

Apple, for its part, made a huge splash with the news that it would be purchasing Beats for some $3 billion. While the company has a successful hardware division which produces hip and rather pricey headphones, a hidden reason is probably in Beats Music, a streaming music service with songs on demand and a recommendation system. However, the deal also gives Apple access to the credibility and connections of owners Dr. Dre and Jimmy Iovine, which should allow it to more effectively expand its footprint in the world of music.

With all these major tech companies getting into streaming music, the space is starting to look very crowded. This raises the question whether or not these new entrants will be able to acquire any significant market share. There are already several very successful streaming music services around, who have a loyal listener base which is unlikely to make the switch to a new platform.

The bottom line
After Amazon announced it would be adding streaming music to its Prime service, and news of Apple's acquisition of Beats, Google is now also reportedly in talks to acquire Songza. While the deal is not likely to be a particularly big one for Google in terms of money spent, it is clear that companies are scrambling to get in on streaming music before it's too late. However, the industry is starting to look rather crowded, and it remains to be seen whether Apple, Amazon and Google will be able to take a bite out of established players' market share.

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Daniel James has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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