Google Said to Be Near Universal Music Deal for Song Downloads
Google Inc. (GOOG) is near an agreement to secure songs from Vivendi SA (VIV)'s Universal Music Group for its new music service, said a person with knowledge of the situation. — An accord with Universal …
Context & Ripple Effects
Google has been assembling a music business all year: it held talks with Spotify about powering a music service back in April 2011, and in October the New York Times reported plans for an MP3 store. What was missing was label content — and Bloomberg now reports, citing a person with knowledge of the situation, that Google is near an agreement with Vivendi's Universal Music Group, the largest of the majors.
The rumored accord would extend a pattern between the two companies: Universal and Google were already near a music-video arrangement for YouTube back in March 2009. Landing Universal would give Google's unlaunched service the anchor catalog it needs to compete on downloads rather than launch empty-handed.
First-order effects
- If confirmed, Google's new music service gains rights to Universal's song catalog, turning the MP3 store reported in October into a licensed product rather than a locked-out one.
Second-order effects
- The remaining major labels face pressure to strike comparable terms quickly or let Google's store launch with a rival's exclusive-feeling catalog advantage.
- Spotify, which Google courted as a partner earlier in 2011, risks being cut out of the arrangement entirely if Google proceeds with its own store instead.
Third-order effects
- Major labels are shifting from treating large technology platforms as piracy adversaries to licensing them as retail channels — a structural turn that makes catalog access a negotiable input for any big internet company entering music.
The trend: Music licensing is becoming the entry ticket for platform companies moving into digital retail, with the largest labels setting terms deal by deal.