Google searching for digital music model as industry crumbles

It's the $20 billion question: What is to be done about the recording industry? Since it appears that the players inside that industry do not know how to save themselves from implosion, outsiders are looking to chart a new course toward sustainability and profitability.

Now, Google (GOOG) is marshaling its massive presence in Web search to deliver music results, in yet another foray into an area beyond its core search ad competency. Called OneBox, the service delivers links to snippets of songs at the top of the search results pages based on a query. It's a flashy announcement -- but reserve judgment on its lasting impact until we see what effect it has on the crippled industry. And if you're looking for a silver bullet, this isn't it.

"This is further proof that the industry is shifting toward music as a service rather than music as a product," Tim Quirk, VP of programming at Rhapsody told DailyFinance. "Fans now have the ability to hear any song they're thinking or talking about, instantly – and not just from computers, but from mobile devices, their TV sets, their stereos, you name it."

"Later this year we plan to become one of Google's streaming music partners, making 30-second samples available for playback directly from the Google search results," Quirk added.

To be sure, Google's new service could be a heavyweight entrant into the free-for-all fray of the digital music wars. At present, there is very little structure to the industry, beyond iTunes, the juggernaut, and new streaming sites whose business models remain questionable. What is beyond question is the fact that the recording industry, instead of growing from a $15 billion to $20 billion business in sales since 2000, has shrunk to $10 billion in sales thanks, in part, to rampant digital piracy of music.

And that's not good for the record companies, artists, other industry players, or consumers -- because, despite what the evangelists of free music espouse, we live in a capitalist society and if the price of music drops dramatically, there will be less incentive to create.

"How you monetize the ability to deliver music to consumers instantly across multiple platforms has been an open question, and I don't think there will be a single answer, but this (Google's new music service) is one of them," Quirk said.

There are a number of core issues that need to be resolved. One is distribution. The industry needs to decide if consumers will download songs of their choice which they will then own or if they would subscribe to channels that provide streaming music, so they can listen to music on demand. Perhaps it will be some combination of the two. Other issues: How much will consumers pay? How much and what kind of music-related physical products, such as tee shirts, posters, CDs and other kinds of merchandise will consumers buy? How must the industry's business model shift to incorporate new technology and emphasize profitable revenue streams? And finally, and perhaps most befuddling, what is to be done about digital music piracy, which has sucked revenue away from the record labels, just as CD sales have plummeted.

Google steps into the breach

Into this melee steps Google, with a solution that brings the power of its massive search engine to bear on music discovery and commerce. For example, if you search for song titles, the product displays links to songs from the artist or album you searched for, from MySpace Music and Lala. The service also allows users to search for songs based on lyrics.

Google has also teamed up with Pandora, imeem and Rhapsody to provide links to their sites "where you can discover music related to your queries as well," according to a company blog post.

"This feature doesn't just make search better. It also helps people discover new sources of licensed music online while helping artists to discover new generations of fans and reconnect with longtime listeners," wrote Murali Viswanathan and Ganesh Ramanarayanan, two Google engineers on the project.

Google admits the service doesn't capture all of the music out there -- how could it. "There's a lot of music out there in the world, and in some instances, we may not return links to the song you're looking for," the engineers wrote. "But by combining the strength of Google's search algorithms with our music search partners' efforts to increase the comprehensiveness of their music content, we're on track to answer more of your rhymes with the right rhythms."

How much of a game changer?

Although Google is touting the service -- and reporters love the "Google saves music" storyline -- some skeptics are calling the hype overblown. After all, music video results have been available at the top of Google searches for some time. And it's unclear what the terms of the agreements between Google and the services and labels is.

"Google users today can already listen to nearly any song in the world by doing a search on Google for a band or song name and clicking one of the top links which is very often a link to Youtube," Michael Robertson, CEO of, an online music storage and sharing service, told DailyFinance. "Without registering they can listen to the entire song in stereo quality as many times as they like. People have been trained to use Youtube as a music search engine."

Time will tell whether the service drives more traffic to Google's partners -- and more revenue to an industry in dire need of some new thinking.

"Substituting those links with links to Lala, iLike or others which requires registration, payment of 10 cents, limit to 1 listen, signing up for a registration or subscription or wading through advertising is not a better consumer experience," said the skeptical Robertson.

Although Google's new offering makes legal music easier to find on the Web, it doesn't change the structural problem of peer-to-peer music piracy, which has cost the recording industry billions. What we really need is a way to remove the incentives of piracy -- when we do that, we create a healthy, legal digital music ecosystem.

Rhapsody's Quirk said his company would see benefits from the deal.

"We get free branding on, and traffic from, the most popular search engine there is," Quirk said. "We provide links within Google's music search results that lead people directly to our fully-programmed artist pages, where they can listen to a given artist's entire catalog."

Read Full Story