December 15, 2010 at 2:15 pm

Report: Google Infighting Blocked Rhapsody/Spotify Acquisition; Company Plans Music Locker

Google considered buying either the Rhapsody or Spotify digital music service earlier this year, according to an anonymous source cited by Silicon Valley Insider on Wednesday.

According to the widely-circulated report, three rival sects within Google warred for control over what would have become a Google music subscription service, following the putative acquisition — a valuable opportunity, given that Google could include such a service on Android, its Chrome browser, and also as a general music service for people who don’t already rely on those Google products.

But these intra-Google factions couldn’t agree on a unified approach, and so the company scrapped its plan to buy Rhapsody or Spotify (the former originally reported weeks ago by Hypebot). Instead, the source says, Google plans to build a music locker service, most likely on top of the Simplify Media service it acquired in May, which could stream users’ local collections to their own smartphones, and to their friends.

The veteran reporter who wrote SAI’s piece is reliable, and we doubt he would have made this up. Hypebot, too, noted several sources as claiming that Google wanted to buy Rhapsody. contacted a Google staffer involved with the site’s music plans to try to verify these reports, but other indications exist of their probable veracity.

Google senior vice president of product development said just last week that these days the company often finds it easier and faster to acquire companies than to build products on its own:

“It’s hard to assemble a team and organize as quickly as you want in these situations. Finding the right people, interviewing them and hiring them takes time. Companies are willing to pay a premium to be in the market right now… You’re buying people with expertise and learning about new markets.”

Google has already purchased countless companies in its ongoing push to be all things to all people. There’s no reason it wouldn’t try the same acquisition approach with music, having already dipped a toe in the water with its music search service, which links web searchers directly to playable search results from third-party music streaming services.

Now that the purchase of Rhapsody or Spotify is apparently off the table, Google is reportedly working on its own music locker service — something it has been said to be doing ever since its acquisition of the music locker service Simplify in May — rather than offering a cloud-based music subscription.

The potential losers in all of this: record labels, music publishers, and the artists they represent. As mSpot confirmed to me in May when it launched its music locker system for Android smartphones, the operator of a music locker does not necessarily have to pay copyright holders when people stream their own music to themselves (although other legal issues have plagued music lockers in the past, many having to do with the automatic replication of users’ local collections online rather than forcing the user to upload each individual file, as mSpot does).

If Google encourages its billions of users to “roll their own” music services using their own music files, many of them acquired for free, rather than paying for a traditional music subscription service — or one that can read music metadata and replicating the library online in the blink of an eye — it’s possible that the most popular music service in the world would not be required to pay much for the music it includes. At the very least, Google (which also needs the labels’ continued support of YouTube) should be able to negotiate rates with music copyright holders from the proverbial catbird seat, because it could always just “pick up its toys and go home,” by helping people stream their own music to themselves instead of offering a more elaborate service that would require more expensive licensing.

That could be what is happening right now. According to multiple reports, Google’s new music lawyer hire Elizabeth Moody has been negotiating with the labels (who have successfully attacked music locker services including and MP3Tunes in the past) to allow Google to create music lockers for users, although she has yet to talk much to publishers, who would also need to sign off on any service that replicates users’ music collections online. She is said to be offering the labels tens of millions of dollars for a locker service, which isn’t much to Google, but would certainly help out these larger labels, most of which have already downsized quite a bit.

Google’s approach to music has been slow, and the company continues to lack a coherent music strategy even as it has made great strides with books and videos. This will likely change soon: SAI’s source claims Google Music, in whatever form, will launch at some point in 2011.

  • Lucas Gonze

    Eliot, this conclusion is arguable: “the potential losers in all of this: record labels, music publishers, and the artists they represent.”

    Music locker services enhance the value of pay-per-download products like MP3s from Amazon and the iTunes music store, as well as of rips from CDs (where the ripper owned the CD). Attacking music locker services reduces the value of these sources, and ultimately the price that users will pay.

    This is about the same line of argument as at .

  • Eliot Van Buskirk

    Thanks for the note, Lucas. I agree that music lockers are not cannibalistic to sales, and increase the value of Amazon- and iTunes-purchased music (the same way they increase the value of music downloaded for free). But the fees that could be extracted from a roll-your-own music service are significantly less than from a pure on-demand play (in mSpot’s case, they are nil).