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.