Alphabet (GOOGL - Free Report) is streamlining its subscription business, but the good news is marred by continuing trouble with publishers over GDPR, investigations by ACCC and fears about impact of India’s antitrust ruling. Further details-
Revamps/Relaunches Music Streaming Service
Alphabet, which includes YouTube in its Google business, appears to be in the process of simplifying its many music and video offerings.
So now, it has a well-tiered array with YouTube Music being the ad supported bottom tier; followed by YouTube Music Premium, which is an all-you-can-eat music service for $9.99 that compares with Apple (AAPL - Free Report) Music and Spotify (SPOT - Free Report) ; and YouTube Premium, which includes all the benefits of YouTube Music Premium (ad-free, playlists, download, music recommendations, standalone mobile app, etc) plus original content for $11.99.
YouTube Red is scrapped and Google Play Music will likely follow suit given that users automatically gain access to YouTube Music Premium. It isn’t clear where YouTube TV fits in but maybe it’s the ad supported version of original videos.
This clarifies the services for customers and also helps the company to focus on the three different segments of the market that have their own opportunities and strengths. It also helps the company fine tune its AI-based recommendations.
Management doesn’t talk about the number of subscribers but YouTube is already the go-to site for music lovers all over the world. This change seems to define YouTube’s original content ambitions (the recently launched Karate Kid sequel, Cobra Kai, appears to be a taste of things to come) as it takes on companies like Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) . Yes, it feels unlikely today, but this is a company with a lot of cash to throw at content and the need to diversify its revenues away from advertising, where competition is increasing every day from Facebook (FB - Free Report) and Amazon, with privacy and antitrust issues intensifying as we speak. As YouTube's global head of music, Lyor Cohen says, it also isn’t a winner-win-all kind of business, so there’s no reason to think YouTube won’t do very well.
Publisher Trouble Continues as GDPR Kicks In
Google held a closed door meeting with publishers at its New York HO with other publishers attending through video conferencing at its offices in San Francisco, Washington D.C., Chicago, and London. But the four big trade groups including the News Media Association, European Publishers Council, News Media Alliance and Digital Content Next, representing 4,000 publishers declined to attend after which Google sent individual invites to about a 100 publishers.
Google explained its position as co-controller of the data collected and reinforced the fact that publishers would have to obtain user consent. Attendees also received an FAQ and letter after the meeting.
The four bodies wanted a written communication from Google about the responsibility it was shouldering with respect to the data collected. If Google doesn’t specify this, they could be held liable under GDPR for misuse of the data collected.
However, Google has earlier said that its control over data usage is limited by its agreements with publishers. So it didn’t respond to this demand but said that it would be aligning its advertising tools with that of the Interactive Advertising Bureau (IAB) Europe’s and IAB Tech Lab’s Transparency & Consent framework. This is actually good news for publishers because IAB’s framework is an attempt to standardize data collection and usage in the GDPR era.
Australia Investigates Data Collection
Probably smarting from the fact that it still hasn’t seen victory over Google in its longstanding dispute over Java, Oracle (ORCL - Free Report) continues to trouble the company. It has now complained to the Australian Competition and Consumer Commission (ACCC) that the Android OS sends location data to Google servers that the consumer is then charged for by the telecom company.
It says that the location data is sent whether or not location services are turned on. Google has of course denied the allegation, saying that location services can be turned off by the user if they choose and that it has the permission of users to collect data to improve the services it offers.
It added that “Google is completely focused on protecting our users’ data while making the products they love work better for them. Users can see what data is collected and how it’s used in one easy place, My Account, and control it all from there… Any location data that is sent back to Google location servers is anonymized and is not tied or traceable to a specific user”
It also accused Oracle: “Like many of Oracle's corporate tactics, this presentation is sleight of hand, not facts, and given that Oracle markets itself as the world's biggest data broker, they know it.” Oracle didn’t respond to this.
Both the ACCC and Australia’s Privacy Commissioner are investigating Google’s practices.
India Antitrust Setback
The Competition Commission of India (CCI) ruled in February that Google had abused its dominant position in search to restrict its publisher partners from entering into agreements with other search services to thereby squeeze rivals out of the market. At the time, Google said that the ruling wouldn’t have a significant impact on its business.
But in appealing the ruling, the company says that it "requires Google to change the way it conducts business in India on a lasting basis and the way it designs its search results page in India," and added that "If Google is restricted from entering into certain types of contracts while the appellate review is conducted, Google will be irreparably harmed." Meanwhile, matchmaking website Matrimony.com, which first brought the case in 2012, has also appealed the decision saying that the $20 million penalty on Google was too small.
Google shares have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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