That sounds like a fundamental disagreement about how much video-wrapped audio streaming is worth (with Google saying enough people will pay to avoid the extra overhead/complexity and the labels thinking that people will walk many miles to save a few bucks). That sounds like a plausible place for negotiations to break down.

I suspect Google is right today (at least for the many people who care about mobile music, since the data and/or storage costs would be prohibitive now), but I can also see how a label might not want to set too generous a precedent for tomorrow (on the assumption that bandwidth and storage might become abundant enough sooner than they're comfortable with).