Google Said Developing Subscription Music Service

Google Inc. (GOOG), developer of the Android mobile-phone platform, plans to start a subscription music-streaming service to challenge Spotify Ltd., said two people with knowledge of the situation.

Negotiations are under way with major record labels to license their music, said the people, who sought anonymity because the talks are confidential. Google, which also owns the YouTube video website, is also discussing renewing deals that cover the use of songs in videos made by consumers, they said.

The worldwide service is targeted for a third quarter start, said one of the people. The effort would strengthen Google’s ties to consumers through its Android software, the most popular operating system in smartphones, as consumers access more music and videos on the go. Spotify lists 5 million paying subscribers and 20 million users of its ad-supported service in 17 countries.

Christopher Katsaros, spokesman for Google, said the company doesn’t comment on rumor or speculation. Google’s talks with the record companies and music publishers for a streaming service was reported by the Wall Street Journal on Feb. 22.

Apple, maker of the iPhone, is also planning a music service that would challenge Spotify in streaming and Pandora Media Inc. (P) in Web-based radio, people with knowledge of the situation said in September.

Google’s service would work on Android and non-Android devices, one of the people said.

Google, based in Mountain View, California, declined 1.1 percent to $790.77 at the close in New York, leaving the stock up 12 percent this year.

To contact the reporters on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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