As we reported here last week, Google seems to be in the midst of getting their ducks in a row to launch a music service. The New York Post is now reporting that Google Music could be ready to launch as early as November of this year. It is being reported that Google has not only began talks with record labels, but is also talking to the Harry Fox Agency.
Google’s Rubin is now speaking to the Harry Fox Agency is a sure sign that talks with record labels have gone smoothly enough for Google to move to the next level. The New York-based Harry Fox Agency collects and distributes license fees to music publishers and houses rights to some 27,000 songs.
The entry of Google into the music business is something that anyone associated with the space should monitor closely. While some think that Internet radio is not really competition for satellite, the entrance of Google could prove that the space is viable. Google does not simply move into a space without a plan in place. They have dominated smart phone sales thus far in 2010, putting a major dent into a business that many thought belonged to Apple. The Google rumors, including a cloud based system, have many competitors scrambling to keep up.
Satellite Radio investors should take note, but at the same time can have confidence in the advantages that satellite delivery has. Satellite radio is still the best method for consumers to access to notch content in their cars. Still, technology will not remain still, and Sirius XM, if they plan on participating in Internet delivered radio, needs to start some major planning as soon as possible. Why should satellite take note? Another form of potential expansion for satellite radio is through smart phones, and in the longer term by adding more nations to the service. In France, Orange, a major carrier just signed an exclusive deal with Deezer for music content. The exclusive deals on the international stage are similar to the exclusive deals sought by Sirius and XM when they were competitors. If exclusive deals in Europe continue, it could lock out international expansion for Sirius XM before it ever gets started.
In the short term, Sirius XM can march along on their way to profits as they have been, but anyone considering long term must entertain the possibilities that the Internet will make its way into cars sooner than many anticipated only a few years ago. It is already there for millions that have smart phones. Getting in the dashboard of an OEM is no longer about a chipset, it is about a USB port or bluetooth connectivity.
Sirius XM reported 583,000 subscribers for Q2 and will be reporting their quarterly results on August 4th.. They could well match that subscriber tally in Q3 and Q4. This represents great growth potential in the near term that can not be ignored. Could we see a satellite vs. terrestrial vs. Internet in the next few years? The possibility certainly exists. For those wondering why some media analysts are not as bullish as they might be…Google and Internet Radio could be a factor.
Position – Long Sirius XM, No Position Google or Apple