SAN FRANCISCO (Reuters) - Google Inc (GOOG.O) launched a music service on Wednesday that allows users to listen to unlimited songs for $9.99 a month, challenging smaller companies like Pandora (P.N) and Spotify in the market for streaming music.
With its new service, announced at its annual developers' conference in San Francisco, Google has adopted the streaming music business model ahead of rival Apple Inc (AAPL.O), which pioneered online music purchases with iTunes.
Google's "All Access" service lets users customize song selections from 22 genres, ranging from Jazz to Indie music, stream individual playlists, or listen to a curated, radio-like stream that can be tweaked. It will be launched for U.S. users first, before being rolled out to several other countries.
At the conference, Google also unveiled improvements to other services, including new mapping features and a voice-activated search. The focus was on giving more options to users of mobile devices using its Android operating system.
Google's shares jumped more than 3 percent while Pandora Media Inc shares were down more than 1 percent on Wednesday afternoon.
The entry of the world's largest Internet company amps up the competition in the nascent market for subscription-based, streaming music. Amazon.com Inc (AMZN.O) and Apple are among the Silicon Valley powerhouses sounding out top recording industry executives, according to sources with knowledge of talks.
Pandora is spending freely and racking up losses to expand globally. Even social media stalwarts Facebook (FB.O) and Twitter are jumping onto the streaming-music bandwagon.
All these companies see a viable music streaming and subscription service as crucial to growing their presence in an exploding mobile environment. For Google and Apple, it is critical in ensuring users remain loyal to their mobile products.
Music has been integral to the mobile experience since the early days of iTunes, which upended the old models with its 99-cent-per-song buying approach.
Now, as smartphones and tablets supplant PCs and virtual storage replaces songs on devices, mobile players from handset makers to social networks realize they must stake out a place or risk ceding control of one of the largest components of mobile device usage.
At $9.99 a month, Google's service is costlier than the $3.99 required for Pandora, but on par with Spotify.
Google executives said their new service takes the work out of managing massive music libraries, noting the streaming model can be endlessly customized. The company will also have a hand in music selection, acting as a curator of personalized content.
It was unclear how large the library will be for streaming. The Verge, a tech blog, reported on Tuesday that Google had signed deals with Universal Music and Sony Entertainment Group, two of the world's largest record labels.
"You don't dismiss Apple, you don't dismiss anyone. But that is not the point," said Rich Tullo, an analyst at Albert Fried & Co. "Pandora is the market share leader in the space and their platform is so disruptive -- it's very hard to disrupt them. When you have 70 million people use it - they are the disruptors."
A procession of Google executives described and showed off a litany of new features and software updates at the annual "I/O" developers' conference, from picture touch-ups on Google+ and re-designed Maps that spot when a user is walking or driving, to Star Trek-like voice-activated search that understands a users' sentences and figures out what he or she is looking for.
"We haven't seen this rate of change in computing for a long time -- probably not since the birth of personal computing," said CEO Larry Page, who began his address reflecting upon a significant moment in his life, when his father got him into a robotic science fair.
"We're really only at 1 percent of what's possible," he said.
Google's popular mapping service, a mainstay of Android devices, features tighter integration with reviews off Zagat, the popular dining-reviews brand that Google bought last year. It also sports more pictures from inside important buildings, sourced from user-uploaded photos. It can now even display the earth realistically as viewed from outer space, something Page said he personally requested.
Shares in Yelp Inc (YELP.N), which like Zagat is built off users' personal reviews, slid 3.8 percent to $29.80 in the afternoon.
Many of Wednesday's updates are designed to enable Google's products to work better on Android and other mobile platforms, and help its crucial community of developers craft the applications that are the mobile operating system's lifeblood.
Executives said Wednesday that some 900 million smartphones and tablets running Google Android software had been activated since the platform's inception in 2010.
Editing by David Gregorio and Bernadette Baum