Google's music venture could be off key

The search giant is moving into a field that's already overcrowded with big players like Apple and Amazon.

By Jonathan Berr May 15, 2013 11:44AM
The Google logo is seen on a podium and projected on a screen at Google headquarters in Mountain View, Califorina Paul Sakuma/AP Google's (GOOG) plan to launch a subscription music service that would give users unlimited access to libraries of record labels such as those from Comcast's (CMCSA) Universal Music Group, Sony (SNE) Music Group and Warner Music Group for a monthly fee is a head scratcher.

As The Wall Street Journal notes, the market is already pretty crowded with players like Apple's (AAPL) iTunes, Pandora's (P) customized digital radio application and Spotify's popular service. Amazon.com (AMZN) plans to develop a music subscription service along with a device to stream audio through speakers or a TV, the newspaper said.

Whether the business is big enough to fit all these market participants isn't clear. Music download and subscription services were available in 23 markets in 2011. A year later, they were available in more than 100, and it seems reasonable to assume that they'll expand further still in 2013. According to data from the International Federation of the Phonographic Industry, sales of digital music rose 9% last year, the second straight year of growth. 

Unfortunately, the subscription music service business isn't yielding the profit bonanza that companies expected. Also is unclear how Google would make money from the service. Investors have faulted it for years for pursuing side business projects such as Google Glass, a wearable computer, that don't appear related to its core search business. Indeed, it launched a music service a few years ago that few people have noticed.

Google, whose share price today topped $900, has been criticized often as a one-trick pony because of its dependence on search. But Wall Street analysts expect the company to earn a whopping $59.4 billion in revenue this year. That's a heck of a trick -- with or without a big moneymaking music service.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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