Google to Stream Music for a Price - Analyst Blog
May 15 2013 - 7:33AM
Zacks
Reportedly, Google Inc. (GOOG), the world's
most popular Internet search engine provider, plans to launch a
subscription-based music streaming service to challenge companies
such as Spotify Ltd. that offer a similar kind of service to music
lovers.
Launched in Oct 2008, Spotify Ltd. is a music streaming service
provider with about 20 million users, a quarter of which are paid
users with monthly subscriptions of $4.99–$9.99. Spotify Ltd.
offers music from major record labels such as Sony
Corp. (SNE), EMI, Warner Music Group and Universal.
As reported, Google’s subscription services will be connected to
Google Play, its online media hub that lets users upload as many as
20,000 songs to the cloud and listen to them on their Android
devices or online. Additionally, Google has signed licensing
agreements with Universal Music Group, Sony Music Entertainment and
Warner Music Group to give people unlimited access to their songs
for a yet-undisclosed fee.
With this move, Google appears to be tapping the potential in
the music streaming market, which is expected to be one of the
fastest-growing markets over the next few years. According to data
compiled by ABI Research and the NPD Group, music-streaming
services are set for rapid expansion over the next five years due
to the increasing use of mobile phones. The report states that the
growth of streaming services comes at a time when digital sales are
relatively stagnant.
The competition in the music streaming market is getting fierce.
The market is already crowded with companies like Spotify, Deezer
and Rdio whose streaming services are quite popular.
According to the NPD Group, 39% of the listeners in the age
group of 13-35 years use Pandora’s streaming music service in the
fourth quarter of 2012, 11% use iHeartRadio streaming service, 9%
are Spotify users whereas the remaining users tune into other
services. Also, Apple (AAPL) and
Amazon (AMZN) are vying for a share of the pie by
launching similar streaming services.
In the first quarter of fiscal 2013, Google reported solid
earnings of $10.07per share, exceeding the Zacks Consensus Estimate
by $1.24. Google’s gross revenue (including total traffic
acquisition costs [TAC]) came in at $13.97 billion, representing a
year-over-year increase of 31.2%.
However, legal entanglements related to competitive matters or
patent infringements remain an overhang. Google has a Zacks Rank #3
(Hold).
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