In Google’s Phone, a Major Clash Between Amazon, Apple, and Microsoft Heats Up

9/24/08Follow @gthuang

Updated Sep. 24 (see below): OK, this is getting good. Yesterday’s announcement that Amazon’s MP3 music store will be pre-loaded onto the G1—the first mobile phone to be powered by Google’s Android operating system—makes the future of music and other mobile services you can get on your phone delectably messy. The deal also drives home the impact that Seattle-area companies are having, and will continue to have, on what promises to be a very global product.

After all, Bellevue, WA-based T-Mobile is the carrier putting out the G1 phone. And, oh yeah, the handset maker for the G1 is HTC, a Taiwanese manufacturer whose North American headquarters happens to be in Bellevue as well. “The T-Mobile G1 is our opportunity in the U.S. to accelerate the mass adoption of the mobile Web,” said Cole Brodman, chief technology and innovation officer of T-Mobile USA, in a statement.

But Amazon’s involvement in the deal is what’s really interesting here. Its music store, currently a distant #2 to Apple’s iTunes, offers some 6 million songs from the four major labels plus thousands of independent labels. The G1 partnership could push Amazon over the hump and position it squarely as Apple’s chief music competitor. It certainly “will put Amazon MP3′s vast selection of low-priced DRM [digital rights management] -free music at the fingertips of even more customers in more places,” said Bill Carr, Amazon’s vice president for digital music and video, in his statement.

Although iTunes still owns the majority of market share in downloaded music, the major labels are clearly backing Apple’s competitors—not just Amazon, but also Napster, MySpace Music, Microsoft’s Zune Marketplace, Rhapsody (another store with local roots, in RealNetworks), and others. What’s more, as VentureBeat points out, much of iTunes is not DRM-free yet, and its songs are slightly pricier than Amazon’s (by 10 cents per track).

It all adds up to a serious push by Google and Amazon to dethrone Apple and quickly grab some mobile market share. But what do local experts think of the strategy? I pinged Bill Baxter, chief technology officer of Seattle-based software firm Cozi and previously the founder of online-music startup SnapTune, to get his take on the deal.

“I have been tracking G1,” Baxter wrote back. “The basic strategy is to suck all the oxygen (licensing revenue) from Microsoft and Apple, leaving only oxygen for Google (ad revenue) which they alone could dominate. Clearly, giving away the software stack, allowing Amazon to do their MP3 thing, probably without collecting a single dime of the download revenues, is an aim to take out Windows Mobile, iPhone, and iTunes all in one fell swoop. It’s an interesting strategy and we’ll see just how effective it will be.”

Baxter is skeptical on that front, though. “I really don’t think Google is very good at complex software stacks for consumers,” he continued. “Further, by relinquishing control over hardware to ODMs [original design manufacturers] like HTC will only undermine the customer user experience. This is the problem Microsoft faces. I would not be surprised to see an iPhone killer (if you’d call it that) come from Microsoft where they control the entire experience (think Xbox-like strategy). We’ll see if Google can pull this off.”

Update: I also heard from Enrique Godreau, co-founder and managing director at Seattle-based Voyager Capital. “With respect to the G1, I would say that this is not a technical innovation, but rather a market innovation,” Godreau says. “That is, I expect the greatest impact of this product to be in the way that carriers, consumers, and coders interact with each other from now on. Like Berlin, carriers need to embrace the reality that for them to continue growing in this information age, they must tear down that wall.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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