Google talks to Spotify to power music service

Rather than launch its own digital music service, Google is considering whether to partner with an existing service, including the likes of Spotify, to power Google Music.

According to a source with knowledge of the talks, Google has told the labels that it has begun discussions with Spotify in recent weeks, though no agreement is in place. Spotify is the European streaming-music service that also has ambitions of launching in the United States.

The talks with Google and Spotify have coincided with an inability by Google to reach agreements with the four top record labels on licensing a cloud music service, the source told CNET. Google had originally hoped to launch a new music service by the end of the year, and then was aiming for March, but now it's indefinite on when it might debut.

Google declined to comment for this story. Spotify, however denied that it has spoken to Google about powering the company's service. "Nothing in it," said Spotify spokesman Jim Butcher.

So, the question is whether Google is trying to scare the labels into ceding better terms. All the major labels would like nothing better than to see another large distributor competing against Apple.

Google and Apple have been racing to roll out cloud music services for a year. They both have spoken to record label execs about enabling users to upload their existing music libraries onto the companies' servers and access their tunes via Web-connected devices. The pitch to consumers is that they would never lose their music again to a hard-drive meltdown and could access their libraries from anywhere in the world they could connect to the Web.

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The cloud is supposed to be the next format for music distribution--it would offer a way for people to store their music libraries on someone else's servers and then access the songs from Web-connected devices. But plenty of people are skeptical.

Apple is said to be closing in. Reuters reported that Apple has completed the work on its service and All Things Digital reported that Apple has signed licensing deals with two labels.

Over at Google, the search company's music service is also ready to launch, technologically speaking. CNET has reported that the company began testing the service internally. Nonetheless, Google has in the past explored the option of entering the cloud music category through an acquisition or partnership. TechCrunch reported in October that Google had talked to Spotify about an acquisition.

Google also has a history of acquiring companies to help them compete in a category where its own product is lagging--for example, acquiring YouTube in 2006.

The issue of Google or Apple being first is sort of moot now. Amazon beat them both. Last month, the Web retailer launched a service that offers users the ability to store music, videos, e-books and all digital media to its servers. The service won't offer all the features that Apple and Google are hoping to offer, however, because Amazon launched without acquiring licenses.

It's doubtful that Google or Apple could adopt Amazon's strategy and launch without licenses. Since launching iTunes, Apple has a history of quarreling with the labels but has never seriously challenged them on the question of copyright. Google is under government scrutiny over whether its search engine enables piracy.

Finally, there's a chance that even though Apple seems to have the edge for second place over Google, it still has two more labels to sign. That could take a while, as Spotify knows. Similar to Apple's situation, the European music company has reportedly signed licensing agreements with two of the labels. That was months ago.

Update 4-23-11, 8:20 a.m. PT: To include Spotify's comments that the company has not spoken to Google about powering its music service.