iTUNES FACING ITS FIRST SERIOUS THREAT…FROM GOOGLE

Google is accustomed to fighting Apple from the underdog position, and has a unique set of weapons at its disposal, Bylund points out. Androids are set to overtake iPhones in quarterly sales, and in total installed base as early as next year. That's a testament to Google's capacity to disrupt an established market with new products. Lessons learned from the Android campaign will apply neatly to this Google vs. Apple music challenge, too.

Rather than mimicking iTunes, Google Music will be a cloud-based service, using technology from recently acquired Simplify Media. “If you never used Simplify Media, you can think of it as a way to listen to your own library of digital music tracks from anywhere,” Bylund writes.

Simplify is dormant at the moment, not accepting new users or handing out software downloads. The whole service should come back to life under the Google banner later this year, according to CNET sources. Google showed a web-based music service to guests at last month's I/O Conference and promised an Android version of it for the Gingerbread/2.3 version of that platform.

Google Music could take off quicker than you might imagine, Bylund asserts. The Big Four would love to see somebody seriously challenging Apple in the music marketplace. They already have a working relationship with Google thanks to the way YouTube keeps music videos front and center. And unlike Amazon, Google has a multitude if of music-playing gadgets in the Androids.

Fans who Google their favorite bands and music now get pointed to online entities such as Pandora, Rhapsody and iLike—but not iTunes or Amazon MP3. “Imagine funneling the purchasing power of that demographic right into Google Music, and you're starting to see why I think this is a very big deal,” Byland concludes. “Google Music won't kill iTunes outright; there are too many diehard Cupertino loyalists to ever achieve that. But check back in a year or two, and iTunes might finally have the serious rival that Amazon MP3 never quite was.”

If Google sticks to the twice-a-year release schedule it’s used for the Android, an Android app would appear around November release, with general availability not far behind. Getting Google Music up to speed quickly would serve nicely to show the market that there is more to Google than endless floods of banner and text ads. If distrust of an ad-only revenue model is keeping the stock price down, this could be a watershed moment in Google's history, Bylund speculates.