Reportedly, Google Inc. (GOOG), the world’s most popular Internet search engine provider, plans to launch a subscription-based music streaming service to challenge companies such as Spotify Ltd. that offer a similar kind of service to music lovers.
Launched in Oct 2008, Spotify Ltd. is a music streaming service provider with about 20 million users, a quarter of which are paid users with monthly subscriptions of $4.99–$9.99. Spotify Ltd. offers music from major record labels such as Sony Corp. (SNE), EMI, Warner Music Group and Universal.
As reported, Google’s subscription services will be connected to Google Play, its online media hub that lets users upload as many as 20,000 songs to the cloud and listen to them on their Android devices or online. Additionally, Google has signed licensing agreements with Universal Music Group, Sony Music Entertainment and Warner Music Group to give people unlimited access to their songs for a yet-undisclosed fee.
With this move, Google appears to be tapping the potential in the music streaming market, which is expected to be one of the fastest-growing markets over the next few years. According to data compiled by ABI Research and the NPD Group, music-streaming services are set for rapid expansion over the next five years due to the increasing use of mobile phones. The report states that the growth of streaming services comes at a time when digital sales are relatively stagnant.
The competition in the music streaming market is getting fierce. The market is already crowded with companies like Spotify, Deezer and Rdio whose streaming services are quite popular.
According to the NPD Group, 39% of the listeners in the age group of 13-35 years use Pandora’s streaming music service in the fourth quarter of 2012, 11% use iHeartRadio streaming service, 9% are Spotify users whereas the remaining users tune into other services. Also, Apple (AAPL) and Amazon (AMZN) are vying for a share of the pie by launching similar streaming services.
In the first quarter of fiscal 2013, Google reported solid earnings of $10.07per share, exceeding the Zacks Consensus Estimate by $1.24. Google’s gross revenue (including total traffic acquisition costs [TAC]) came in at $13.97 billion, representing a year-over-year increase of 31.2%.
However, legal entanglements related to competitive matters or patent infringements remain an overhang. Google has a Zacks Rank #3 (Hold).
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