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If the service managed to convert just 10% of the more than 200 million Android phone and tablet owners, it would have north of 20 million customers.
IS GOOGLE MUSIC A BUST?
Three Months After Launch, the Much-Ballyhooed Offering Is Falling Short of Google’s Expectations, Inside Sources Tell CNET
Three months after launching, Google Music hasn't lived up to expectations, CNET reports. According to multiple sources with knowledge of the talks, Google's managers have told their contacts at the labels that customer adoption and revenue are below what they expected. As you may recall, Google Music was set up to sell downloads and streams songs to users who store their music libraries on the company's servers.

Google Music has been live for barely a quarter, so nobody is panicking, CNET’s Greg Sandoval writes. The tech giant has yet to throw the full force of its marketing muscle behind the service, and Google reps have told the record companies that they’re trying to correct certain issues. Still, the numbers are low enough for some in the music sector to be concerned, the sources said. On top of that, Google has yet to license tracks from Warner Music. A Google representative declined to comment to Sandoval.

As a companion service to Android-powered mobile devices, Google Music has a massive potential user base: If the service managed to convert just 10% of the more than 200 million Android phone and tablet owners, it would have north of 20 million customers.

Google managers have told label execs that the service will get a boost once Google implements its hardware strategy, the sources told Sandoval. Google plans to start competing against Apple—a daunting prospect, to say the least—by building an array of consumer devices. The Wall Street Journal recently reported that the company is building a wireless entertainment system that will stream music throughout the home.

The challenge facing Google is exacerbated by the fact that the online music sector has been getting mighty crowded in recent months. Google Music launched amid a proliferation of subscription services, including Spotify, Rdio, MOG and a reinvigorated Rhapsody, while Research in Motion, T-Mobile, Cricket and MetroPCS have bolstered their music offerings. And two weeks ago, CNET reported that Microsoft has held talks with some of the record companies about creating a new digital music store that would serve Xbox owners as well as buyers of an upcoming Windows-based phone. The parties have discussed the possibility of both streaming and downloads.

The majors are counting on the mobile sector as one of the keys to the survival of the music industry. They see a future where subscription services offer unlimited access to music and the fees are painlessly wrapped into phone bills, Sandoval points out.

So is Google Music out of step with current music tastes? The record companies didn't think so when Google first approached them in 2010. The music biz couldn't be happier that a company with Google's money and marketing muscle would be taking on iTunes. But in the early going, the 800 pound gorilla has brushed off this would-be threat as if giant Google were no more than a pesky fly.

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