The digital music industry is set to become the next battleground between the internet search giant Google and Apple, the maker of the iPhone.
Google is expected soon to launch an internet-based music service created to rival Apple's market leader, iTunes. The move into music follows Google's US$12.5 billion (Dh45.91bn) purchase of Motorola Mobility, a mobile-device maker, which will enable Google to make handsets running its own software in a similar way to Apple. Online music services are regarded as a key weapon in the fight for the rapidly growing global smartphone market.
But increased competition for music content between Google and Apple and other internet-based music services music such as Spotify, which streams music directly to subscribers, will give the music labels that owns the digital rights to the content extra leverage.
This will enable music producers in the UAE to share their content more easily over the internet while offering better value and greater choice.
"For smaller music labels in countries such as the UAE, platforms such as Spotify and a future Google music service mean opportunities for wider international distribution," says Adrian Drury, a senior analyst at the international research firm Ovum.
But analysts believe that prices will be squeezed for all music labels as companies such as Google and Apple compete by offering smartphone users the maximum choice of music for the minimum price.
"They will inevitably see unit prices decline and music consumption move from album purchase to all-you-can-eat access … Already indie labels in the US are expressing serious concern over the impact Spotify is having on their business," Mr Drury says.
Despite the loss of Steve Jobs, its co-founder and charismatic head, and increasing competition in the smartphone market, Apple remains a formidable competitor.
Although analysts were disappointed by Apple's recent quarterly figures, iPhone sales rose 21 per cent compared with the same period the previous year.
"If Google wants a share of this market, it will have to do more than just feature-match iTunes," Mr Drury says. "It will have to have a knock-out proposition, and in practice it is going to have to do something that looks a lot like Spotify in the sense that it will have to be all-you-can-eat, with as wide a choice of music as possible.
"The challenge for Google is going to be to put that service together on an ad-supported-only basis."
Until Google can fully integrate itself with the handset maker Motorola, it is limited to an internet-based, advertising-led business model, whereas Apple is a handset manufacturer with margins that are believed to be as high as 40 per cent. That is why Apple's most recent quarterly revenues topped $28bn, while Google's revenue came in at just under $10bn.
Google faces a number of challenges in entering the online music market. Analysts believe that the search giant has been developing a music service for some time, although its offering has so far been limited to storing music on remote computers, a process referred to as cloud computing.
"There has been a rumour going around for the last couple of years that Google has been preparing to take on Apple iTunes with its own music service," Mr Drury says. "It has, however, had issues with securing rights to be able to deliver a download to own a Spotify-style all-you-can-eat streaming service. Today Google's Music service is just a cloud storage service."
But the music labels are likely to welcome competition in the smartphone market. According to market watchers, Apple's market leadership has enabled it to manoeuvre the labels into a hammerlock, allowing it to dictate terms and prices.
"There are deep tensions between the music majors and iTunes, as one would expect when a single retailer has such a dominant share of the market," Mr Drury says.
"One thing Apple has achieved is to negotiate a deal that enables Apple to analyse all music you have in iTunes, whether acquired through iTunes or otherwise, and identify your entitlement to those tracks and sync automatically across all your iOS [Apple] devices. The service is called Music Match."
The record labels are prepared to partner Apple to recoup some of the immense losses they have suffered as a result of internet users, particularly those under 25, illicitly obtaining their content free from file-sharing sites.
"This business model gives the labels a flat fee from Apple and enables the labels to redeem some of the revenue they have lost as a result of people downloading music for free from the internet via peer-to-peer file-sharing sites such as Limewire," Mr Drury says.
Google is hoping that the same market pressures will enable it to strike content deals at the level needed to take on Apple's iTunes.