Google recently announced it will soon open a music store of its own soon in an attempt to capture some of the online music industry’s lucrative profits.
So far, Google is only in negotiations and hasn’t signed with any labels yet.
Apple’s iTunes store currently dominates the market. In 2007, Amazon launched its own music store, but as of this year it has only captured 12 percent of the market — hardly major competition for the entertainment giant.
There are several reasons why Apple dominates online multimedia. It entered the market quickly. It had massive success with the iPod and iPhone. Its integration with iTunes, which offers a direct, easy way to buy songs, has been unparalleled — so far.
Amazon has essentially failed to be a competitor for Apple here. First of all, it entered the game too late, offered no incentive to switch from Apple’s massively successful setup and had less exposure. Honestly, I was shocked to hear 12 percent of the market even knew songs could be bought from Amazon.
It comes down to this: When suppliers compete, prices are generally lowered as they try to capture as much of our money as they possibly can. When there is no competition, there’s usually little incentive for lowering prices.
Why should you care? Glad you asked!
The going rate for most music now is 99 cents for most song s and $1.29 for popular songs. It’s unlikely this price will go down, as most of the money made from a music purchase is already tied up in contracts to the people who actually make the music.
What can go down is the price of other, more expensive items like movies and TV episodes.
Google can actually do this. Amazon failed, but the Internet giant has several advantages Amazon doesn’t.
First, if there is ever going to be a Skynet, it’s going to run on Google’s servers. Maybe they’ll call it GNet and run targeted ads on the drones. The level of information Google collects on its users is jaw-dropping, rivaled only by God. Google uses the information to match you up with products you’re statistically likely to buy and put the ads all over the Internet.
So it wouldn’t be beyond Google, at least from a technological standpoint, to say, “OK, we know predominantly 26- to 29-year-old males visit this site from 8 to 10 p.m. Monday through Friday after work, and there’s an 86 percent chance they like the band ‘Whomevuh,’ and the band’s top single right now is ‘Whateveh.’ Let’s run a discount if they click on the link and buy the song and music video at 25 percent off.”
Really. They could do that. It’s freaky.
What’s more, YouTube exposure has historically helped Apple’s music sales, but YouTube is owned by Google. Yep, in 2006 Google bought YouTube. That kind of control gives Google a huge edge on the competition as it can not only increase its own exposure, but completely stop Amazon and Apple’s income from YouTube, barring any open contracts with those companies.
Finally, it’s entirely possible Apple’s largest market for media has been its sales from its own line of products, particularly the iPhone. The iPhone makes it all too easy to download music quickly and painlessly, believe me. Amazon didn’t really have that, to its massive disadvantage, but Google already has its promising Android operating system out on cell phones. It only makes sense at this point for it to capture those unused profits.
Honestly, I’m most surprised it hasn’t done it already.
In the end, this is what you need to know: Classical economics predicts that as long as it’s more convenient for you to search the Internet and download the music for free, you’ll tend to download the music from torrents or servers like Rapidshare until the price is so low it’d be more convenient to download the music quickly from one place than it would be to search all over the Internet and wait for the music. This will always be true, no matter who starts their own store.
Until prices get that low, every legal group in the world can yell about contracts, moral obligations and artists’ income until they’re blue in the face.
The bottom line — it’s tough to beat free.