Note: this post is part of the R/WW Files on Online Music.
Universal Music Group (UMG) is teaming up with Google and a new start-up company called gBox, Inc., to sell DRM-free music on an experimental basis, in what many will interpret as a direct challenge to Apple’s iTunes Music Store (iTMS).
The way gBox is expected to work — it debuts August 21 and ends January 31, 2008 — is that the service will get referrals through ads that UMG purchases from Google at standard advertising rates. When users search for a band or a song using the Google search engine, ads will appear next to the results directing them to gBox.
There DRM-free songs from the Universal catalog will cost 99 cents, 30 cents less than what the iTMS sells DRM-free music from the EMI label. Together Universal and EMI are two of the top four record labels in the world.
Copy-protected songs purchased through the iTMS won’t play on portable digital audio devices other than the popular iPod, which has sold 100 million units worldwide, and iPods can’t play DRM-protected songs purchased at rival online music stories. By ditching DRM, the record labels and competing music download services can reach iPod users without going through the iTMS.
UMG will make DRM-free songs available to other online retailers as well, including Wal-Mart, Best Buy, and Real Networks (Rhapsody), but only gBox will get Google referrals.
Google’s involvement with gBox and UMG’s DRM-free experiment looks sinister enough — many observers believe gBox will pose a direct threat to the iTMS. But when you get down to it, Google’s participation may simply be what it does best: search and making oodles of money from AdSense.
The real drama here is UMG’s experiment, if other major music labels follow, how the average consumer responds, Universal’s love/hate relationship Apple and Steve Jobs, and what Apple does or doesn’t do to counter-punch, if needed.
Think about it.
Google’s activity of late points toward Apple, not away from it. There’s the recent release of Apple’s iLife and iWork applications, which include tighter integration to certain Google products, the availability of YouTube on the AppleTV and iPhone, and Google Maps on the iPhone. And let’s not forget Google CEO Eric Schmidt sitting on the Apple board of directors.
Why would Google risk pissing off Jobs, harming the iTMS, and stunting future growth opportunities between the two companies for something other than what it does during the course of its day — search and making money off text ads?
gBox fits perfectly into the Google model.
Google will not get a cut of music sales and describes its new arrangement strictly as an advertising relationship.
Additionally, gBox Chief Executive Officer Tammy Artim has said gBox’s marketing strategy is to include Google and social networking sites, not just using the traditional approach of driving music buyers to a specific site to discover new artists and songs and to make purchases.
Instead of doing marketing and (advertising on) billboards on Highway 101 to go to gBox, we want to take advantage of the viral element that has been so successful for companies in the past, Artim said.
UMG itself notes that the importance of the DRM-free experiment will “provide valuable insights into the implications of selling our music in an open format.” Google is listed as a participant, along with Wal-Mart, Best Buy, Rhapsody, Transworld, Passalong Networks, Amazon.com, and Puretracks. The focus of gBox is to make the “search and buying process as simple as possible” and, since consumers search for music online, “Google is a powerful way to drive consumers to this test.”
UMG, whose labels collectively account for one out of every three new releases sold in the United States, according to Nielsen SoundScan data, will make albums and tracks available from artists such as Amy Winehouse, Fall Out Boy, 50 Cent, Black Eyed Peas, Maroon 5, Sting, Elvis Costello, among many more.
If gBox is successful, and in doing so chips away at the dominance of the ITMS, it will be due more to the allure of DRM-free music and the record industry’s battle against Jobs and Apple than it will be because of Google’s involvement.