Google's $12.5 billion acquisition of Motorola Mobility Holdings today sent shockwaves through the mobile world, fundamentally altering the landscape of the business.
For the music industry, this is a significant development given the role that mobile will play on the future of digital music.
With the acquisition, Google now has the same kind of software and hardware integration that Apple (as well as the struggling RIM) enjoys with all its products. And if Google wanted to plant a flag in the mobile space, it could hardly find a better brand that Motorola to do so. Motorola once dominated the market share for U.S. mobile phones. It actually made the first portable mobile phone ever. The brand name will forever be wedded to the mobile phone market, despite losing its footing several times over the years (first when mobile phone technology went from analog to digital, and again when the market shifted to smartphones).
In 2008, Motorola went all-in on Android as the backbone of its smartphone strategy, setting the stage for what become a very successful line of Droid devices. But this is about more than just mobile phones, although that's the biggest impact in the short term. It's also about tablet computers and even possibly set-top boxes (both of which the Motorola Mobility unit also makes). It's Google positioning itself for the post-PC world we keep hearing about.
Google positions the move as being as much about Motorola's patents as its mobility division. Remember, Motorola invented the mobile phone, so the library of patents it holds going back 30 years is a significant asset that Google as owner can now license to other Android partners, or just add some of the licenses to the open Android spec.
Placating those other Android manufacturers will be a needed step, seeing as with this buy Google is now competing with those companies as well as licensing to them. With Microsoft snugly in bed with Nokia and Google now owning Motorola (not to mention Apple's iPhone being a closed environment), competing smartphone manufacturers have few choices left for the underlying technology powering these more advanced devices.
So what's all this mean for the music industry? A few thoughts:
- Distribution: Google stumbled the first time it attempted to build its own phone (the Nexus, which relied on a third-party partner to make the device) primarily because it had no way to sell it other than online. Motorola products are available globally directly from multiple wireless operators.
- Music: Google Music is a cloud-based music service. It's still in a beta mode as Google works out its licensing issues. But it's not hard to see a roadmap that leads to a fully streamed music service in the relatively near future. Embedding a streaming music service into a mobile phone built from the ground up for that purpose could be a compelling offer, IF Google/Motorola can also get the wireless operators on board.
- Tablets and Set-Top Boxes: Any cloud or other type of streaming music service is made more valuable the more places it can be accessed. By controlling the creation of not only mobile phones, but also tablet computers and (perhaps more importantly) set-top boxes, Google now has the chance to embed whatever Google Music eventually becomes into the living rooms of millions of homes.
Finally, there's the implications this may have on other mobile brands. There's been rumors swirling that Microsoft may acquire Nokia ever since the two joined forces on Windows Phone 7 earlier this year. This could force that from rumor to reality. RIM is struggling as well, and could be an acquisition target itself for anyone looking to make a mobile play.
And device manufacturers themselves are looking to up the stakes. Just last week, HTC invested $300 million in Beats Electronics, the maker of the Beats By Dre line of headphones.
And watch Apple closely now. The company has nearly $80 billion just sitting there waiting to be spent on something. Fanboys have been clamoring for years for it to buy a mobile operator and "do things right," but that remains a bit of a long shot. Then again, nobody saw Google/Motorola coming either.