Warner Music Inks Deal With Google for Music Subscription Services

Warner Music Group has struck a licensing deal with Google for two music services the technology giant is launching later this summer, according to executives familiar with the agreement. Google will offer two distinct subscription services – one through its YouTube online video property and another via its Google Play platform.

Executives at Warner, which is the first record label to commit to Google’s proposed music service, declined to comment. A YouTube spokesman issued the following statement: “While we don't comment on rumor or speculation, there are some content creators that think they would benefit from a subscription revenue stream in addition to ads, so we're looking at that.”

Google is also in deep negotiations with Universal Music Group, Sony Music Entertainment and other labels to nail down an agreement similar to the one it now has with Warner.

Google In Talks For Music Streaming Service

Google’s efforts to build an on-demand music service was first reported in February by the Financial Times. Fortune followed up with a report that detailed Google’s plans for two separate music services.

Google will be jumping into a fiercely fought market for on-demand music streaming. Spotify, Rhapsody, Muve Music, Slacker, Samsung Music Hub, Sony Music Unlimited and Rdio are among the current players slugging it out for dominance. And later this summer, Beats Electronics will re-launch a revamped MOG service, branded as Beats Music.

Google, however, will be coming to the party with several formidable advantages – YouTube and Android.

Its YouTube platform attracts 800 million unique viewers a month. That’s vastly more than the tens of millions of people worldwide who are estimated to be using on-demand streaming music services -- both free and paid. In addition, Google’s Android operating system powered 68.4% of all smartphones shipped globally in 2012, compared with 19.4% for Apple’s iOS, according to Strategy Analytics.

Under current plans, which could change as Google firms up its strategy, the Mountain View, Calif., technology giant will offer an ad-free subscription tier for YouTube viewers. In addition, it would offer another service from its Google Play platform, which currently sells song downloads similar to Apple’s iTunes and has a free scan-and-match locker service that lets users stream songs from their music library via any Internet connection. Subscribing to a Google Play music service would give listeners access to licensed songs that they don’t own, according to executives knowledgeable with the plans but who are not allowed to speak publicly on behalf of Google.

Warner has historically marched to its own tune when it comes to building a digital strategy. The label declined to join Universal and Sony in creating VEVO, a music video network that has had massive success on YouTube. Instead, Warner created its own YouTube channel – The Warner Sound, which features music videos from Warner’s own artists and has consistently ranked among the top 5 most popular YouTube Partner channels, according to comScore Inc. The company, whose digital strategy is shaped by longtime Warner executive Stephen Bryan, also held out for almost a year after rival record companies signed deals to sell downloads on Google’s music store, launched in 2011.

Bryan, who led Warner’s negotiations with Google for the upcoming music services, declined through a spokesman to comment for this story.

For labels, which have long since moved beyond initial fears that on-demand services could cannibalize music sales, the proliferation of music services is a welcomed development. Many executives who have spoken with Billboard.biz have pointed to the recent report from the International Federation of the Phonographic Industry showing an overall growth in music revenue for the first time since 1999. The IFPI credited much of that increase to the flowering of digital music services, which now number some 500 worldwide, covering 100 global markets, up from just 23 a year ago.