Will Google Buy a Seat at the Music Table?

googlemusicAfter tossing up its Google Video store to less than rousing reviews, the latest rumor is that Google is about to enter the online music fray. I suggested the other day that Google buy Pandora, my favorite online listening spot.

But the perceived money is in downloadable songs. And while I am on record that I won’t buy any DRM infested music, a lot of people will. So unlike selling downloadable videos, which I think is a supply in search of a demand, I think there is something to be said for selling downloadable songs.

There are two ways to build an online music store. From the ground up, which may result in a better, more innovative product, but takes longer to develop and much longer to generate any meaningful market share. The other way is to buy and incorporate an existing store. Yahoo got music by acquisition when it bought Launchcast and then MusicMatch.

So the word on the web is that Google is thinking about buying Napster, the popular, but DRM-infested namesake of the once innovative and much maligned by the RIAA peer to peer music service. Or maybe not. Once again, we’re all talking about something that might be a creation of the blogosphere.

I think buying Napster is probably Google’s best avenue to enter the online music business. For one thing, Google can’t afford the fallout from another blown opening. Additionally, while I don’t use Napster, I’ve read pretty good stuff about it. Napster gives Google instant market share and music credibility. Plus we know what Napster looks like already, so there won’t be hundreds of “are you kidding” posts the day Google goes live with it.

I’d love to see Google change the world again by bringing forth a new, innovative online music store. But the legal restrictions, the RIAA-gone-wild problem and the somewhat mature market make that unlikely. Plus, if Google thought Google Video was going to rock the house, then I’m not sure I want it to try to reinvent too many wheels.

So buying entry might be the way to go. But Google must recognize and remember that online music is quickly becoming a commodity. Online music stores are no longer destinations. They are online gas stations, dispensing song files they squeeze out of the record label cartel.

As such, brand building is almost an exercise in futility and the online music stores will always be at the mercy of the record labels. Exxon just proved that you can make money in commodities, but to do so you must have an inherent advantage or learn to operate cheaply and quickly. One of the best advantages in a commodity game is the ability to predict where the market is going next. Predicting the actions of the granny hating, catless bag holding, all-in-a panic record industry sounds like a tough order to fill. So I don’t see much chance for an advantage.

Without an inherent advantage and with what most believe to be very thin margins that don’t leave much room for competing on price, Google has to compete on service and name alone. That’s harder to do. There’s a lot of demand for online music, but it is, at the end of the day, a commodity. Since people care less about where they buy a commodity, it makes sense to enter the game by acquiring someone who has market share. But the price has to be right.

All in all, it’s a good move for Google. If the price is right.

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