Google Music Launching Without Sony, Warner Catalog Deals

Google (NAS: GOOG) is poised to unveil its Google Music digital retail platform during a media event Wednesday, but CNet reports that at least two of the four major label catalogs will be conspicuously absent from the rollout.

Google issued invitations to the press event late last week, with multiple reports indicating the digital services will add premium downloads to its existing Google Music Beta cloud streaming service. Citing multiple industry sources, CNet states Google has reached a licensing agreement with Universal Music Group but remains in negotiations with Sony Music Entertainment and Warner Music Group. It is unclear whether EMI Music will participate -- last week, The Wall Street Journal reported Universal will acquire EMI's recorded music unit for $1.9 billion, while Sony will scoop up its publishing operations for $2.2 billion.

Google confirmed last month it is poised to open its own music retail platform: "I think we're close" to rolling out the store, said senior vice president of mobile Andy Rubin during an appearance at the AsiaD conference in Hong Kong. He declined to offer specifics on the storefront, but he said it will not simply mirror Apple's (NAS: AAPL) iTunes or the Amazon MP3 Store.

"[The store] will have a little twist -- it will have a little Google in it," Rubin said. "It won't just be selling 99 cent tracks." Insiders say Google plans to leverage the social graph, enabling its 40 million Google+ social network users to recommend songs in their digital library to their contacts -- those friends will be able to listen to the track once for free, and then purchase the song in the MP3 format, probably for 99 cents each.

But Google must secure licensing rights to all songs sold as MP3s and recommended by users. The four majors together distribute 87 percent of all music sold in the U.S., and their participation is considered essential to the success of any music retail effort or premium digital service. Google nevertheless introduced its Music Beta cloud storage platform without label agreements in place: Music Beta enables consumers to upload and store their digital music collections via the web for streaming playback across Flash-enabled connected devices including Android smartphones and tablets as well as the desktop. Users may store as many as 20,000 songs for free -- the service syncs activity on different devices, meaning that playlists created on the user's smartphone will automatically show up on their computers.

Because Music Beta arrived without licensing agreements, consumers are blocked from sharing songs with friends or purchasing premium downloads from Google. Major label executives have indicated that Music Beta talks broke down earlier this year because they felt Google failed to properly address their piracy concerns. The New York Times recently stated that Google's expanded plans still leave doubts about content security: "We want to make sure [Music Beta's web-based music storage] locker doesn't become a bastion of piracy," one senior-level label exec said. Warner Music also believes Google's financial terms are unacceptable -- Music Beta is free for users and generates no income for labels, although Google maintains that the service will help generate download sales to make up the difference.

At AsiaD, Rubin said Google has struggled to come to terms with the labels because media companies in general have been unable to reconcile their perception of the Google platform with what it is becoming. "Google is in the very, very early phases of adding consumer products to our portfolio," Rubin said. "The media industry didn't see us as that. They saw us a search company."

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