To answer the question, briefly: nobody really knows at this point. But I do think Google is going to have to make some sacrifices in the short term if the Music service is going to get off the ground. And that's because the record labels won't play ball - at least not by Google's rules according to All Things D, quoting two apparently well-connected sources.
Of course, the words of a couple anonymous music industry insiders aren't definitively representative of the feelings of all the (presumably numerous) parties involved in Google's Music negotiations. For all we know, those persons could be part of some of the industry's historically more stubborn labels. Still, any talk of slowed or impeded progress on Music is unsettling, especially given the unexpected launch of Amazon's Cloud Player music streaming and locker service.
Into The (Amazon) Jungle
Amazon already has a couple legs up on Google in the cloud music race - they've got a streaming and locker storage service up and running on Android and, I would contend, the most competitive online music store in the business. Google, on the other hand, presumably has much of the backend in place for Music's locker storage (as the leaked Music app showed us), and they've probably got pretty good storefront templates to work with from the Google ebookstore and Android Web Market. They just don't have the music.
In a perfect world, where Google could seal licensing deals with all the world's record labels tomorrow, Google Music would likely give Amazon some genuine competition. Combined with the company's excellent search, Google Checkout as a payment platform, and the ever-growing Android masses, Google could gain absolute dominion over the Android music market in a matter of months. But they haven't.
Instead, the Amazon MP3 app has shipped with Android devices since day one. While I've only used it once (ever, I think), I do buy a fair amount of DRM-free MP3s from my desktop computer via Amazon. Since the launch of Cloud Player, those purchases have also populated in my Cloud Drive automatically, free of storage restrictions. And let's not forget that Amazon's prices on newly released albums are almost always the lowest of anyone's. I honestly can't think of a reason to switch to another music storefront. I mean, Amazon is making iTunes look antiquated.
So, what could Google bring to the table that Amazon doesn't? There's certainly a few things, but it's hard to see how any of them (aside from a legit, Spotify-like streaming service) could put Music above the Amazon Cloud Player / Amazon MP3 dynamic duo.
There's been some speculation that Google is attempting to secure rights from labels to operate a service offering (presumably ad-supported or paid) streaming in conjunction with an option to actually purchase music as well.
This, of course, would be in addition to (and probably work with) the music "locker" cloud storage service that's already been demonstrated on Android. Such a service would be a game-changer overnight - particularly because it seems unlikely Amazon, a retailer, would be interested in a subscription model. Apple, on the other hand, may be attempting to work out something similar with the labels as we speak.
But Google has never announced just what it's trying to do with Music - for all we know, it could be a simple MP3 storefront that neatly mimics Amazon's model. Google would probably have a one-up on Amazon with the Android implementation of its cloud music service as far as ease of syncing and app features, but that's only so much of a draw for users.
One thing Google could do is make use of the audio portion of YouTube's super-robust transcoding system, and allow users to upload audio files of almost any format to their lockers without worry. That'd be a killer feature, as Amazon currently only supports MP3 and M4A (AAC) files on Cloud Player's upload utility.
Another option would be some sort of sharing feature - the ability to "lend" your friends a track for a single (or any fixed number) playback, or perhaps a social feature that allows you to listen to songs from a list your friends' favorite tracks. The pitfall here is that these sorts of features would be asking a lot from record labels in terms of licensing - terms they'd probably never be willing to agree to.
We all know Google Music is coming, and we're all pretty excited about it. But it's a product we know nearly nothing about at this point (aside from the cloud storage / streaming), and Google has had a number of stillborn projects before, one of which (Buzz) rested its faith squarely on the Android-using masses.
Buzz failed because Facebook, Twitter, and FourSquare were already firmly cemented into the Android social ecosystem by the time it was released - there just wasn't any gap for Buzz to fill. Will Amazon MP3 and other 3rd party music solutions have the same effect on Google Music? We'll just have to wait and see.