Mobile music evolves, leaving operators in the dust

Music is the next battleground in the escalating conflict between Apple and Google. On Thursday, Google announced it will add a streaming music service to its Android mobile platform, effectively pitting the company against Apple's iTunes effort. The new Android service hinges on media-sharing software developed by Simplify Media, acquired by Google in March (although the deal was not formally announced until now)--according to the Simplify website, its solution "connects people directly with their content, without the hassles of synching or uploading all their files. Simplify users can also share their personal media with family and close friends in a private, secure group." Details on the new Android service are relatively scarce, but during a demonstration at Thursday's Google I/O conference in San Francisco, vice president of engineering Vic Gundotra said the solution will enable users to wirelessly download music directly to their smartphones via Android Market--Google will also offer a desktop application giving users remote access to all of their DRM-free media.

The Android music service is essentially a preemptive strike against the so-called iTunes.com, the much-rumored web-based version of iTunes that Apple is expected to introduce sometime this summer. Late last year Apple forked over a rumored $85 million to acquire digital music startup Lala, a streaming music effort offering consumers access to more than 8 million fully licensed songs for free, without ads or subscriptions--its model instead limited users to one listen for each song or album. (Consumers could also purchase also unlimited plays of songs for 10 cents, or DRM-free MP3 downloads for 89 cents each.) Apple reportedly purchased Lala expressly to acquire the startup's engineering staff and their collective expertise with cloud-based music technology, and shut down the Lala service late last month. The Wall Street Journal reports the Lala solution will now power iTunes.com, which is expected to enable consumers to purchase music without going through the dedicated iTunes program on desktops and iPhones. In addition, Apple plans to populate other websites with "buy" buttons, integrating iTunes transactions into Internet radio and music review sites.

Too much is still unknown about both streaming services to handicap their respective fortunes, but on paper, iTunes' dominance over the digital music market appears unassailable. Back in February, the iTunes Store recorded its 10 billionth song download, after less than seven years in existence--even more impressive, the milestone arrived less than two years after iTunes surpassed the 5 billion download benchmark in June 2008. And while it's unclear whether Google can pose a legitimate threat to Apple's digital music supremacy, it is clear that no one else has a realistic shot--especially not mobile operators, which now account for just 4.9 percent of digital music sales in the U.S., down from 6.6 percent in 2008, according to music industry trade publication Billboard. Based on 2009 sales and market share data, iTunes now generates 26.7 percent of all U.S. music sales, up from 21.4 percent in 2008 and far outpacing second-place Wal-Mart, which slipped from 15 percent in 2008 to 12.5 percent a year ago. Verizon Wireless led the way among carriers with a 2.21 percent market share and Sprint is next at 0.86 percent, followed by T-Mobile at 0.79 percent and AT&T at just 0.48 percent.

Billboard blames the drop in operator music revenues on declining ringtone downloads as well as shrinking ringtone prices. Given that ringtones now seem as antiquated as the Victorola and Rudy Vallée 78s, it's remarkable to consider that as recently as 2005 they still made up 80 percent of total U.S. mobile music revenues. Much as ringtones defined their particular chapter in mobile music's evolution, the signature service of today's App Store era is Shazam's song discovery and identification application, which this week crossed the 75 million worldwide user benchmark, roughly six months after topping 50 million. Shazam says it's on track to reach the 100 million user mark later this year--no less impressive, consumers have now relied on the app to identify more than a billion songs. Those same consumers discovered a richer, more interactive mobile music experience along the way, and now Apple and Google look poised to push the technology to the next level. The beat goes on, and innovation stays in rhythm. -Jason