By Alexei Oreskovic and Edwin Chan
SAN FRANCISCO (Reuters) - Google Inc launched a music service on Wednesday that allows users to listen to unlimited songs for $9.99 a month, challenging smaller companies like Pandora 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, 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.
Google unveiled a string of improvements to other services, including new mapping features and a voice-activated search, at the conference. The focus was on giving more options to users of mobile devices using its Android software, the operating system that now runs three out of every four smartphones sold.
Shares of Google, the world's largest Internet search company, jumped more than 3 percent while Pandora Media Inc shares were down more than 1 percent on Wednesday afternoon.
Google's new music service amps up the competition in the nascent market for subscription-based, streaming music. Amazon.com Inc 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 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.
With a music service, Google further "locks" consumers into its sphere of products and services, said Chris Silva, an analyst with Altimeter Group.
"They're trying to sell an ecosystem," he said. "The more things I'm doing, the more things that tie me to Google services."
At $9.99 a month, Google's service is costlier than the $3.99 required for Pandora, but on par with Spotify.
The music service features millions of tracks from Universal Music, Sony Entertainment Group and Warner Music Group, as well as from thousands of independent labels, according to a Google spokeswoman.
Some analysts said the new service allowed Google to catch-up to offerings from the likes of Spotify, but did not offer anything unique. Forrester analyst James McQuivey said combining the service with video or game content might have made it stand out.
"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," said Page, whose on-stage appearance came a day after he acknowledged suffering from a rare nerve problem affecting his vocal cords. The problem, which affects his breathing and makes it difficult for him to speak at length, sidelined Page from public speaking engagements last summer, though Page spoke for 45 minutes on stage on Wednesday.
Decrying a "negativity" in the technology industry which he said impedes progress, Page singled out competitors Microsoft Corp and Oracle Corp, criticizing the companies for not being sufficiently collaborative with Google and other companies. Google was sued by Oracle last year, and companies affiliated with Microsoft have complained about Google's practices to European antitrust regulators.
"Most important things are not zero sum," Page said.
LACK OF GLASS
The conference comes as Google's Android software has become the most popular operating system in both smartphones and tablet PCs. Executives said Wednesday that some 900 million smartphones and tablets running Google Android software had been activated since the platform's inception in 2010
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, which like Zagat is built off users' personal reviews, slid 3.8 percent to $29.80 in the afternoon.
Conspicuously absent from the more than three-hour opening keynote session was any mention of Google Glass, the wearable computing device that the company began distributing to a limited set of early users and developers last month.
The futuristic-looking device has elicited admiration from many technology-lovers, but some have questioned whether the stamp-sized electronic screen mounted on eyeglass frames will appeal to mainstream consumers.
While many enthusiastic attendees and Google staffers strolled about the conference center sporting the Glass devices, executives spent little time discussing it on stage.
Google missed an opportunity to "show that they think they're onto something big," said Forrester's McQuivey.
(With additional reporting by Jennifer Saba in New York; Editing by David Gregorio, Bernadette Baum and Bob Burgdorfer)