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Music streaming is the next frontier for Google

Tracey Samuelson Jul 2, 2014
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The last few weeks have been busy in the online music industry. First, Apple bought Beats Music. Then Amazon added a music service to its Prime subscriptions. Now, Google is buying Songza, a streaming service that recommends music based on your mood or activity.

There are categories like “going to a festival” or “twerk at werk,” which queued up Pharrell’s “Happy.”

“Everybody’s competing for that slice of consumers’ time,” says Willy Shih, a professor at Harvard Business School. “You look at a service like Pandora, where the number of hours [users are] connected to the service per month is actually surprisingly high.”

When users aren’t on their computers, they can keep listening on smart-phone apps, which Shih says is appealing to advertisers. Since Google is already good at selling ads, this could be one more offering in their portfolio. 

But users have also shown they’re willing to pay to opt out of ads – and pay over and over again, essentially renting the music instead of buying it, says Sam Hamadeh, the founder and CEO of PrivCo, a research firm that’s looked into the financials of several streaming services.

“That’s sort of the holy grail in the internet or e-commerce business,” he explains. “Once you sign up, it’s a one-time sale, and a one-time marketing effort to get you to buy it and then it pays off dividends for years, if not forever.”

However, Hamadeh cautions these services aren’t actually profitable yet.

So there’s another reason to be in this business – and it’s not really about music.

“Every service that Google can offer that keep web users or mobile phone users within the Google universe of applications and services adds value,” says Matthew Crain, a professor of media studies at Queens College CUNY.

 It also keeps consumers away from Google’s competitors – which might be enough to make the company want to “twerk at werk.”

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